An MF Global trustee on Wednesday called for a “global settlement' in the scramble to recover money from the bankrupt brokerage firm, a bid for peace amid a bitter fight over limited resources and missing customer cash.
Louis J. Freeh, the trustee of MF Global's holding company, complained in a court filing that a nearly year-long legal battle was taking too long and draining precious resources. Mr. Freeh, a former director of the federal Bureau of Investigation, said he seeks to settle with both the trustee for MF Global's brokerage arm, James W. Giddens, and an overseas administrator tending to the firm's British unit.
It is unclear, however, if a truce is realistic. Negotiations involving the British administrator could complicate the already-tense dynamic. Mr. Giddens is currently locked in a legal dispute with the administrator over $700 million trapped in London.
Mr. Freeh and Mr. Giddens have also spent months feuding. The dispute only escalat ed on Wednesday when Mr. Freeh used the court filing to criticize Mr. Giddens for recently joining a lawsuit against MF Global's top executives.
The battle stems from the divergent missions of the two trustees. Mr. Freeh, as the advocate for creditors like banks and other companies, is pursuing more than $2 billion in claims against the brokerage unit. But Mr. Giddens is tasked with recovering cash for the brokerage firm's customers, who saw more than $1 billion of their money disappear when MF Global blew up last October.
At the time, as the firm faced mounting pressure surrounding its big bets on European debt, MF Global employees tapped customer accounts to meet the firm's needs. The money belonged to thousands of ranchers, farmers and other MF Global clients. The misuse of client funds, a major breach of federal law, prompted a wide-ranging federal investigation that remains open.
With the pool of assets dwindling, the fight to recover funds for clients and creditors alike has grown more contentious. In recent weeks, Mr. Freeh and Mr. Giddens have feuded over what money belongs to which trustee and whether the farmers and other clients will ever be made whole. Mr. Freeh has predicted that customers will recover 100 percent of their funds. Mr. Giddens has a more modest forecast that they will recoup in the “90 percent range.â€
As the feuding drags on, Mr. Freeh on Wednesday said it was time to change course.
“The most efficient and economical use of the resources of the various estates is a cooperative approach,†he wrote in the filing. “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 - in order to maximize recoveries for customers and general estate creditors alike, worldwide.â€
In a statement on Wednesday, a spokesman for Mr. Giddens said the two trustees “are cooperating to the greatest extent possible,†while noting that “their different roles in the proceedings†put them at odds. The spokesman, Kent Jarrell, added that “the trustee will continue†to cooperate.
But even as the trustees opened the door to a settlement, Mr. Freeh criticized Mr. Giddens for recently suing Jon S. Corzine and other top MF Global executives. Mr. Corzine, a former New Jersey governor, was MF Global's chief executive. In the filing on Wednesday, Mr. Freeh formally objected to Mr. Giddens joining a lawsuit filed by the firm's customers.
He accused Mr. Giddens of “attempting to assign claims that belong to and benefit the general estate to representatives of the customers.†Mr. Freeh is also considering legal action against some executives, which could be complicated by Mr. Giddens's lawsuit. Some people close to Mr. Freeh would have preferred that Mr. Giddens join their case rather than teaming up with the customers.
But Mr. Jarrell argued that Mr. Freeh has “some inherent conflicts in opposing†Mr. Giddens's actions. Some of the executives named as defendants in the case, including the chief financial officer, are currently employed by Mr. Freeh.
