MF Global Inc.’s workforce of 1,066 broker-dealer employees was fired as the failed brokerage closes its New York office and liquidates in an attempt to return assets to customers under the guidance of a trustee.
The broker-dealer, winding down since Oct. 31, will pay employees through Nov. 15, according to a statement today from the office of the trustee, James Giddens. As many as 200 former employees are being hired to assist in the liquidation of the broker-dealer, Giddens said.
Some employees of MF Global Inc., the broker-dealer unit of bankrupt MF Global Holdings Ltd., learned they were being fired from news reports, a person familiar with the matter said. The press release was distributed to and reported by the news media before all MF Global employees who were losing their jobs were notified, according to the person, who declined to be identified because they aren’t authorized to speak publicly on the firings
“We were well into the process of notifying employees and were attempting to personally reach as many employees as possible when the release went out,” said Kent Jarrell, a spokesman for Giddens.
Tiffany Galvin, a spokeswoman for MF Global, declined to comment on the timing of the trustee’s release.
MF Global Holdings Ltd., which was run by former New Jersey governor and Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for Chapter 11 bankruptcy Oct. 31 after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade.
Giddens, overseeing the liquidation of the bankrupt company’s brokerage unit, is managing the subsidiary’s wind-down under the Securities Investor Protection Act. He will try to close the broker-dealer’s New York offices as soon as possible and rent cheaper space in the city, according to the statement. The unit’s Chicago offices will stay open as the business is wound down, Giddens said.
Firings Were Mandated
The firings were mandated under the SIPA, Giddens said. The action is necessary to “preserve assets and identify and marshal other property to maximize the estate in a manner that is fair to all customers and other creditors,” he said in the statement.
Giddens also sought to end leases on Nov. 30 for MF Global properties it rents in New York, Washington, Boston, San Francisco, Dallas, Florida and two spaces at Park Avenue Plaza in New York City.
The trustee also asked a judge to let him streamline procedures to end contracts with vendors and financial services providers, saying the move is needed to minimize administration expenses and save resources. Claims arising from the parties who’ve had their contracts ended should be filed with Epiq Bankruptcy Solutions LLC, the claims-agent, Giddens proposed.
About 17,000 in customer account positions and $1.5 billion in account funds have been moved to other future commodity merchants, Giddens said.
About $593 million in MF Global’s commodity customer funds are unaccounted for, according to a person with knowledge of regulatory probes into the failure of the New York-based firm. Commodity customers may be required to share some of their cash with other clients unless money missing from some accounts is found, said Stephen Harbeck, president of SIPC.
By law, while SIPC can compensate securities customers for missing cash, it can’t advance funds to commodity customers to replace cash. SIPC, with a reserve of over $1 billion, couldn’t keep its doors open for long if it had to compensate all victims in the event of loss due to investment fraud, the agency says on its Web site. SIPC, a private, government-sponsored company, insures brokerage accounts for up to $500,000 in certain securities, including as much as $250,000 in cash in case a brokerage goes bankrupt.
“We are saddened by the trustee’s actions today to terminate so many of our colleagues,” Diana DeSocio, an MF Global spokeswoman, said in an e-mailed statement.
The brokerage’s parent listed $39.7 billion in debt and $41 billion in assets in its bankruptcy filing. Owners of the parent company’s senior unsecured debt may get back 10 cents to 30 cents on the dollar without an asset sale, credit-ratings company Fitch Ratings said in a report.
The bankruptcy case is MF Global Holdings Ltd., 11-bk-15059; and the brokerage case is In re MF Global Inc., 11-ap-2790, U.S. Bankruptcy Court, Southern District of New York (Manhattan).