* Trustee can assign claims against Corzine, other insiders
* Judge raises concerns about potential proceeds allocation
By Nick Brown
NEW YORK, Sept 5 A Manhattan bankruptcy judge
said on Wednesday he was prepared to allow the trustee unwinding
MF Global's broker-dealer to join forces with some of
the company's former customers who have sued ex-Chief Executive
Jon Corzine and other insiders.
U.S. Bankruptcy Judge Martin Glenn said he will make his
decision official when the trustee, James Giddens, files court
papers outlining the details of the cooperative effort. The
filing will reflect language changes requested by Glenn,
particularly over concerns about how proceeds of the class
actions would be allocated among MF creditors.
Glenn ordered the plan's language updated to address
objections by the defendants in the class actions, and by Louis
Freeh, the trustee liquidating MF Global's parent entity.
MF Global went bankrupt in October after its exposure to
European sovereign debt spooked investors. Corzine, a former
chief of Goldman Sachs Group Inc and a former senator and
governor of New Jersey, stepped down days later.
Commodities traders, 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 MF Global's misuse of
customer money in a frantic attempt to keep it afloat. Giddens
us responsible for recovering as much money as possible for
Some customers have sued Corzine, Chief Financial Officer
Henri Steenkamp, Chief Operating Officer Bradley Abelow and
others, accusing them of mismanaging the firm and catalyzing its
Giddens has similar claims against the executives for
negligence and breach of fiduciary duty, but earlier this month
said he would forgo bringing them himself in favor of assigning
them to and cooperating with the class-action plaintiffs.
Under Giddens' plan, proceeds from the litigation would be
sent to the broker-dealer's estate and distributed by Giddens to
A spokesman for Giddens said he was pleased that the judge
plans to let the proposal go forward.
"We think this will bring tremendous efficiencies and
jumpstart the discovery and the prosecution of the claims
against Corzine and others," spokesman Kent Jarrell said.
A spokesman for Corzine had no immediate comment.
THE ALLOCATION PROBLEM
Louis Freeh, the trustee liquidating MF Global's parent
entity, objected, saying some of Giddens' claims against the
defendants would benefit MF Global's general estate, not its
customers, and should therefore be filed by Freeh.
The two trustees represent the interests of different sets
of creditors, and 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.
Glenn voiced his own concerns, asking Giddens' attorneys how
proceeds of the lawsuits -- particularly settlements -- would be
allocated between customers and other MF creditors.
"If all of the defendants came to you and said 'We'll make
all commodities customers whole, but there will be nothing for
(other creditors), would that be an appropriate" settlement,
Giddens agreed to tweak the plan to allow Glenn, as well as
the judge in the class action, to review settlements.
Disputes over allocation have been a common theme in MF
Global's liquidation. Glenn has never issued a ruling laying out
rules to determine which creditor constituencies are entitled to
which sources of recovery, but it has been a key point of
contention between the trustees.
If parties in the class action reach a settlement that must
be divvied between creditors, Judge Glenn may finally have to
weigh in on the issue.
The brokerage liquidation is In re MF Global Inc, U.S.
Bankruptcy Court, Southern District of New York, No. 11-2790.