MF Global Trustee Expects Customers Will Recoup Cash in the \'90% Range\'

WASHINGTON - An MF Global trustee dampened hopes that customers will recover all of their missing money from the bankrupt brokerage firm, telling lawmakers on Wednesday that a $1.6 billion gap remains.

In testimony before the Senate Agriculture Committee, James W. Giddens predicted that clients could recoup in the “90 percent range” of their cash. Mr. Giddens, the trustee tasked with plugging the gap in customer money, has so far retrieved about 80 percent of the funds.

“We'd very much like to pay every customer 100 percent, however, it will be a time consuming and uphill battle,” he told lawmakers. Mr. Giddens also updated lawmakers on his concerns about wrongdoing at the top rungs of MF Global.

His warnings came in stark contrast to testimony from another MF Global trustee, Louis Freeh, who is responsible for making the brokerage firm's creditors whole. In written testimony for the hearing on Wednesday, Mr. Freeh referred to the $1.6 billion gap as an “alleged shortfall.”

Mr. Freeh, a former director of the Federal Bureau of Investigation who did not attend the hearing on Wednesday because of a conflicting commitment, also said he believes “all of the customers of MF Global Inc. eventually will be made whole.”

The dueling statements stem from the divergent missions of the two trustees, who have spent months clawing over a limited pool of assets. Bankruptcy law is fuzzy as to which group takes priority.

Mr. Giddens, in charge of unwinding the brokerage arm of MF Global, must return money to customers who suffered a shortfall when the firm collapsed on Oct. 31. But Mr. Freeh, as the advocate for creditors like banks and other companies, is pursuing more than $2 billion in claims against the brokerage unit.

That pursuit gives Mr. Freeh the incentive to forecast a happy ending for MF Global customers. If the customers are made whole, then Mr. Freeh's effort will not been seen as an aggre ssive attempt to deprive clients of their money.

But Mr. Giddens noted that the $2 billion or more in claims have forced him to keep a cushion of cash on hand that otherwise would belong to customers. The demands, he said, “stand as a very significant impediment.”

“We appreciate Mr. Freeh's confidence,” Mr. Giddens said, but he cautioned that the hunt for cash will be “time consuming” and uncertain.

The hearing on Wednesday was the latest in a series of Congressional examinations into the collapse of MF Global. In the aftermath of the bankruptcy, Congress subpoenaed Jon S. Corzine, the firm's chief executive, to testify.

On Wednesday, lawmakers heard testimony from the trustees and top officials at the Commodity Futures Trading Commission, including Gary Gensler, the agency's chairman. Mr. Gensler focused his testimony on potential measures to better protect customer funds.

“I believe it is critical that we bring the regulators' v iew of customer accounts into the 21st century,” he said.

Such efforts gained new focus in recent weeks when another futures brokerage firm, PFG Best, collapsed amid revelations that its chief executive was raiding customer accounts for 20 years. The wrongdoing was discovered this summer when the chief executive, Russell Wasendorf Sr., attempted suicide.

“We were assured MF Global was an outlier,” said Senator Debbie Stabenow, a Michigan Democrat who is chairwoman of the Senate Agriculture Committee. But, she said, “it happened again. For the second time in eight months, customers were left holding the bag.”

MF Gobal's illicit actions were discovered last fall when the firm faced swirling demands stemming from big bets on European debt. At the time, MF Global employees tapped customer accounts to meet the firms own needs. The money belonged to thousands of ranchers, farmers and other MF Global clients.

The revelation of the missing money, t he first major breach in the history of the futures industry, prompted a wide-ranging investigation from the C.F.T.C. and the Federal Bureau of Investigation. But that examination has stalled in recent months, drawing concerns from lawmakers.

“We need to know answers and hold people accountable,” Ms. Stabenow said.

Jill Sommers, the C.F.T.C. commissioner overseeing the investigation into MF Global, assured lawmakers on Wednesday that “our division of enforcement is actively engaged in the investigation”

“We have a dedicated team working on this every day,” said Ms. Sommers, adding that the agency's investigators are “proceeding as expeditiously as they can.”

She declined to detail the nuances of the case or assess blame on executives.

But Mr. Giddens, who has conducted his own investigation of MF Global's final days, sharply criticized the firm's senior executives for allowing the customer money to vanish.

“I think the pr eponderance of the evidence indicates that senior management at MF Global was aware of the liquidity crisis and was aware that customer funds at the end were being utilized to cover other costs at the firm,” he said on Wednesday.

“I'm taking your answer to mean you're also referencing Mr. Corzine,” Senator Mike Johanns, a Republican of Nebraska, asked.

“Yes sir,” Mr. Giddens replied.

Mr. Corzine, a former Democratic senator and governor from New Jersey, has denied knowing that underlings were misusing customer money. No one at the firm has been accused of wrongdoing.

But Pat Roberts, the ranking Republican on the committee, seized on Mr. Giddens's claims.

“Theres a lot of angst,” Mr. Roberts said, referring to a growing number of former MF Global customers who have called on federal officials to punish the firm's executives.

Lawmakers also expressed concerns that MF Global customers will not recover their money, but Mr. Gidde ns was cautious. “I know this has been a long frustrating period for customers, he said, noting that he has already returned about $4.7 billion to anxious clients.

While he was doubtful that customers would break even, he vowed to fight to “eliminate the shortfall.”