Ex-FBI chief named trustee in MF Global bankruptcy
Saturday, November 26, 2011
NEW YORK (AP) — Former FBI Director Louis J. Freeh has been tapped to be the trustee for MF Global’s Chapter 11 bankruptcy case.
The U.S. Trustee for the New York region requested court approval for the appointment, according to documents filed Friday.
MF Global and a committee of its creditors asked the court on Monday for permission to name a trustee so that the company can get a binding commitment for financing while it is in bankruptcy and help it recover any funds left over after its customers are paid back.
U.S. Bankruptcy Court Judge Martin Glenn in New York granted the motion the next day and ordered U.S. Trustee Tracy Hope Davis to appoint a trustee for the case.
Davis selected Freeh, a former federal judge who served as director of the Federal Bureau of Investigation from 1993 through 2001. Freeh is now chairman of Freeh Group International Solutions LLC, a global risk-management firm.
Freeh must obtain a bond of no less than $26 million as part of his appointment, according to a separate court filing on Friday.
MF Global collapsed after making a disastrous bet on European debt. It filed for U.S. bankruptcy protection on Oct. 31. The company also is being investigated by regulators and the FBI over whether it violated securities and criminal laws.
Freeh would be charged with reorganizing or liquidating MF Global’s assets for the benefit of the company’s estates, creditors and other stakeholders.
In its motion asking for the appointment of a trustee, MG Global said that a trustee would be best positioned to coordinate and manage requests from regulators and investigators looking into the company’s dealings and would be able to arrange for the prompt return of funds that “rightfully belong to the debtors.”
The company noted it hasn’t been able to get a binding commitment for debtor-in-possession financing, but its lenders have agreed to make about $26 million in cash collateral available to the company once a suitable trustee is appointed, according to the filing.
Regulators are investigating whether MF Global tapped money from clients’ accounts as its own financial condition worsened. That would be a violation of securities rules.
Another court-appointed trustee overseeing MF Global’s bankruptcy said Monday that up to $1.2 billion is missing from customer accounts, double what the firm had reported to regulators last month.
That trustee, James Giddens, also said that after he releases about $520 million from accounts that have been frozen nearly all the assets under his control will be distributed.
Giddens previously returned to customers $1.5 billion in collateral for their trading accounts with MF Global. He has a goal of eventually returning 100 percent of all funds to customers, though that could be reduced by the apparent shortfall.
Customers use the accounts for trading derivatives. The value of derivatives is based on the value of an underlying asset, such as interest rates, oil prices or currency rates. MF Global was one of the biggest players in the derivatives market.
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