MF Global bankruptcy exit plan primed for court hearing

Thu Apr 4, 2013 9:24pm EDT
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By Nick Brown

NEW YORK (Reuters) - MF Global Holdings MFGLQ.PK on Friday will seek court approval of a plan to liquidate its assets and repay creditors, signaling the final stages of its large and politically-charged bankruptcy.

The collapsed brokerage would repay the bulk of lender JPMorgan Chase & Co's (JPM.N: Quote) claim, and would pay unsecured creditors as much as 34 cents on the dollar under a plan slated to go before Judge Martin Glenn in the U.S. Bankruptcy Court in Manhattan.

MF Global, led by former New Jersey Gov. Jon Corzine, filed for Chapter 11 in October 2011 after investors were spooked by its $6.3 billion exposure to European sovereign debt. It became a political firestorm when regulators discovered billions of dollars were missing from the accounts of MF's commodity trader customers.

Corzine and other MF Global officials were ordered to appear in multiple Congressional hearings, and the FBI, Securities & Exchange Commission and at least one Congressional committee launched investigations.

The brokerage was found to have misappropriated customer cash to try to plug liquidity gaps as it faltered. While no criminal charges have been filed against Corzine, regulators say his negligent conduct contributed to the firm's demise.

In a report issued on Thursday, Louis Freeh, the former FBI director and trustee in charge of liquidating MF's estate, blamed "the risky business strategy engineered and executed by Corzine and other officers and their failure to improve the company's inadequate systems.

The report came several months after a similar account from James Giddens, the trustee working to recover money for the broker-dealer's trader customers, which concluded that Corzine mismanaged the firm's growth.

Corzine is facing civil lawsuits from Giddens and former customers.   Continued...

Former MF Global CEO Jon Corzine testifies before a House Financial Services Committee Oversight and Investigations Subcommittee hearing on the collapse of MF Global, at the U.S. Capitol in Washington, December 15, 2011. REUTERS/Jonathan Ernst