According to Jon Corzine, the ex-CEO of MF Global Holdings Ltd. (MFGLQ), bankruptcy trustee James Giddens’s efforts to be part of some of the investor class action lawsuits against the firm’s former and current executives are negatively impacting his defense. Corzine, who is also Goldman Sachs Group Inc.’s (GS) (GS) former co-chairman, left his position at MF Global last year, mere days after the brokerage giant failed in the wake of losses it sustained on European sovereign debt and its overwhelming inability to account for about $1.6 billion in customer funds. MF Global would go on to file for bankruptcy protection.
Rather than file his own securities lawsuit, Giddens has decided to work with the lawyers of the firm’s customers. He won’t join them as a plaintiff but he will “assign” his legal claims to their attorneys and fully participate in their cases. Giddens considers it totally “appropriate” for his office to join forces with the plaintiffs’ securities fraud lawsuits, and he believes that this cooperation agreement is the “most efficient, expedited and cost-effective” means of getting back additional assets for MF Global clients and creditors.
Meantime, Corzine and other ex- and current MF Global executives are complaining that this arrangement would give Giddens complete and total authority over the documents and books they would be able to get in their defense and that this unfairly limits them. Per the former executives’ lawyers, restricting the objectors’ rights to obtain discovery deprives them of the chance to a proper defense, violates due process principals, and is not in line with the goals and requirements of the federal rules that preside over civil litigation. (Also opposing Giddens’s cooperation agreement with the plaintiffs and their lawyers is ex-FBI director Louis Freeh, who is tasked with wrapping up MF Global Holdings Ltd.’s affairs. He believes that the deal oversteps Giddens’s authority and that the bankruptcy trustee is moving claims that belong to the holding company’s creditors and not the brokerage’s customers.)
This week, Bankruptcy Judge Martin Glenn said the cooperation agreement needs to grant his court greater authority over approval of the way creditors and customers would share the settlement proceeds or winnings. He also said the agreement’s wording should call for any settlement to be approved by both the district court, where customers are suing the MF Global directors, and the bankruptcy court. Glenn said that upon the implementation of such changes he is willing to approve the agreement.
If you invested in the MF Global 6.25% Senior Notes that were due in 2016, contact our securities lawyers to ask for your no obligation, confidential consultation.
Corzine Says MF Global Trustee’s Deal Harms His Defense, Dow Jones, August 30, 2012
MF Global Judge Seeks Changes to Trustee Lawsuit Agreement, BloombergBusinessweek, September 5, 2012
More Blog Posts:
Even With Securities Lawsuits Over MF Global’s $1.6 Billion Customer Funds Loss, Don’t Expect Criminal Charges, Institutional Investor Securities Blog, August 16, 2012
$1.2 Billion of MF Global Inc.’s Clients Money Still Missing, Stockbroker Fraud Blog, December 10, 2011
Shareholder Lawsuit Against Goldman Sachs CEO and Other Financial Firm Executives is Dismissed, Institutional Investor Securities Blog, August 18, 2012
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