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Corzine says MF trustee encroaching on his defense
NEW YORK |
NEW YORK (Reuters) - Former MF Global Chief Executive Jon Corzine is fighting efforts by a bankruptcy trustee to join forces with customers suing him over the commodities brokerage's demise.
Corzine, along with other current and former MF executives, filed an objection in court on Wednesday arguing that their ability to defend themselves would be hurt if trustee James Giddens is allowed to assign his legal claims to plaintiffs in existing cases.
The executives are defendants in multiple lawsuits accusing them of mismanaging the firm and playing a role in its October 2011 collapse.
"Nothing in the Bankruptcy Code authorizes such limitations on the objectors' rights and defenses or an enlargement of the trustee's rights," lawyers for Corzine and the other executives wrote in documents filed in U.S. Bankruptcy Court in Manhattan.
If allowed to join the customer cases, Giddens would have the right to limit the information and documents available to the executives through discovery, as well as dictate which documents the executives would turn over to plaintiffs, lawyers for Corzine and the other executives wrote.
Lawyers for Corzine and former Chief Financial Officer Henri Steenkamp did not return calls seeking comment.
MF Global went bankrupt in October after its exposure to European sovereign debt spooked investors. Corzine, a former chief of Goldman Sachs Group Inc (GS.N) and a former senator and governor of New Jersey, stepped down days later.
Commodity trader customers of the firm's broker-dealer unit are facing an estimated $1.6 billion shortfall in their accounts, which Giddens has said is due to the firm's misuse of customer money in a frantic attempt to keep it afloat. Giddens is charged with recovering as much money as possible for those customers, including through litigation.
Some of the customers have sued Corzine, Steenkamp, Chief Operating Officer Bradley Abelow, General Counsel Laurie Ferber and others. Giddens, too, said he saw valid claims against the executives for negligence and breach of fiduciary duty, but earlier this month he said he would forgo bringing those claims himself in favor of assigning them to and cooperating with the class-action plaintiffs.
Under Giddens' plan, any proceeds from the litigation would be sent to the broker-dealer's estate and distributed by Giddens to customers.
The plan also faces pushback from Louis Freeh, Giddens' counterpart trustee who is liquidating MF Global's parent entity.
The two trustees, which represent the interests of different sets of creditors, have long battled over entitlement to various pots of money. Freeh is trying to pay back creditors of MF Global's parent, like lender JPMorgan Chase & Co (JPM.N).
In court papers on Wednesday, Freeh said some of Giddens' claims against the defendants would benefit MF Global's general estate, not its customers, and should therefore be filed by Freeh.
In addition to reinforcing the trustees' power struggle, Freeh's objection is a sign that he might bring claims against Corzine and other executives, a notion his lawyer, Brett Miller, did not dispel in a phone interview.
"All viable causes of action are on the table, and will be pursued if appropriate," Miller said.
But a Giddens spokesman questioned whether Freeh could sue MF Global's own employees.
"He has some inherent conflicts in opposing this motion because individuals currently employed by MF Global Holdings are defendants in the litigation," spokesman Kent Jarrell said in a statement.
Bankruptcy Judge Martin Glenn will consider Giddens' plan, and the objections to it, at a September 5 hearing.
Freeh in court filings called for cooperation between the two trustees, saying they have more important things to worry about than claims against Corzine -- namely a lawsuit in the U.K. over Giddens' attempt to recover $700 million from the coffers of MF Global's U.K. affiliate for the benefit of U.S. customers.
"The estates need to focus their efforts on a global resolution of all inter-estate claims and potential causes of action rather than creating inter-estate litigation," Freeh said. Freeh's objection was supported by MF Global's unsecured creditors' committee.
Separately, a group of MF Global bondholders also objected, arguing that customers would lack incentive to pursue claims against the executives that could benefit other creditors.
The bankruptcy is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.
The liquidation of MF Global's broker-dealer unit is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790. (Reporting By Nick Brown; Editing by Cynthia Osterman)
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