Jon Corzine and other ex-managers of MF Global Inc. are appealing a court ruling calling for 100 percent repayment to customers of the bankrupt brokerage, a move its trustee said may delay distributions.
A notice of appeal was filed yesterday in U.S. Bankruptcy Court in Manhattan by Corzine, the ex-New Jersey governor and onetime Goldman Sachs Group Inc. co-chairman, and managers targeted in a lawsuit, including Bradley Abelow and Henri Steenkamp. They are challenging a Nov. 5 ruling by U.S. Bankruptcy Judge Martin Glenn that would allow all missing customer funds to be returned by the end of the year.
“We are extremely disappointed that the people who were responsible for the failure of MF Global are now the ones who may hold up the final distribution owed to their former customers,” said Kent Jarrell, a spokesman for James W. Giddens, the trustee overseeing the distributions. Giddens is prepared to make his best efforts to return 100 percent of what customers are owed “but may now be blocked” by the appeal, Jarrell said in a statement.
Steven Goldberg, a Corzine spokesman, said those appealing “do not have any desire to delay payments to customers.”
“This appeal is simply about our view of the law, which is that once the customers are paid in full, the trustee does not have any right to step into claims of customers that no longer exist,” Goldberg said in an e-mailed statement. “There is nothing preventing the trustee from making full and final distributions to customers now and then litigating this appeal.”
MF Global Holdings Ltd., the brokerage’s parent company, filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion bet on bonds of some of Europe’s most indebted nations.
The company listed assets of $41 billion and debts of $39.7 billion. More than $1.6 billion in customer funds that should have been segregated were missing.
Corzine and other parties previously objected to the distributions, saying in court papers that they would allow Giddens to improperly assign funds that might be part of the general creditors’ estate.
The distributions require the court to find that there is a shortfall in the customers’ estate of at least $632 million, and advance funds from the general estate of $233 million, according to court papers.
James Kobak, a lawyer for Giddens, said during the Nov. 5 hearing that there is $837 million in the general estate, an amount he hopes will be “fortified” by further recoveries. The only potential source of more recoveries is a lawsuit against Corzine and the other former executives brought by customers who claim mismanagement led to the company’s downfall.
Giddens’s request to distribute 100 percent of what customers are owed had support from the U.S. Commodity Futures Trading Commission and representatives of the ex-customers who sued MF Global’s former managers.
The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The liquidation of the broker is In re MF Global Inc., 11-bk-02790, in the same court.
To contact the reporter on this story: Tiffany Kary in U.S. Bankruptcy Court in New York at email@example.com.