By Nick Brown
NEW YORK, Aug 29 (Reuters) - Former MF Global Chief
Executive Jon Corzine is fighting efforts by a bankruptcy
trustee to join forces with customers suing him over the
commodities brokerage's demise.
Corzine, along with other current and former MF executives,
filed an objection in court on Wednesday arguing that their
ability to defend themselves would be hurt if trustee James
Giddens is allowed to assign his legal claims to plaintiffs in
existing cases.
The executives are defendants in multiple lawsuits accusing
them of mismanaging the firm and playing a role in its October
2011 collapse.
"Nothing in the Bankruptcy Code authorizes such
limitations on the objectors' rights and defenses or an
enlargement of the trustee's rights," lawyers for Corzine and
the other executives wrote in documents filed in U.S. Bankruptcy
Court in Manhattan.
If allowed to join the customer cases, Giddens would have
the right to limit the information and documents available to
the executives through discovery, as well as dictate which
documents the executives would turn over to plaintiffs, lawyers
for Corzine and the other executives wrote.
Lawyers for Corzine and former Chief Financial Officer Henri
Steenkamp did not return calls seeking comment.
MF Global went bankrupt in October after its exposure to
European sovereign debt spooked investors. Corzine, a former
chief of Goldman Sachs Group Inc and a former senator and
governor of New Jersey, stepped down days later.
Commodity trader customers of the firm's broker-dealer unit
are facing an estimated $1.6 billion shortfall in their
accounts, which Giddens has said is due to the firm's misuse of
customer money in a frantic attempt to keep it afloat. Giddens
is charged with recovering as much money as possible for those
customers, including through litigation.
Some of the customers have sued Corzine, Steenkamp, Chief
Operating Officer Bradley Abelow, General Counsel Laurie Ferber
and others. Giddens, too, said he saw valid claims against the
executives for negligence and breach of fiduciary duty, but
earlier this month he said he would forgo bringing those claims
himself in favor of assigning them to and cooperating with the
class-action plaintiffs.
Under Giddens' plan, any proceeds from the litigation would
be sent to the broker-dealer's estate and distributed by Giddens
to customers.
The plan also faces pushback from Louis Freeh, Giddens'
counterpart trustee who is liquidating MF Global's parent
entity.
The two trustees, which represent the interests of different
sets of creditors, have long battled over entitlement to various
pots of money. Freeh is trying to pay back creditors of MF
Global's parent, like lender JPMorgan Chase & Co.
FREEH'S OBJECTIONS
In court papers on Wednesday, Freeh said some of Giddens'
claims against the defendants would benefit MF Global's general
estate, not its customers, and should therefore be filed by
Freeh.
In addition to reinforcing the trustees' power struggle,
Freeh's objection is a sign that he might bring claims against
Corzine and other executives, a notion his lawyer, Brett Miller,
did not dispel in a phone interview.
"All viable causes of action are on the table, and will be
pursued if appropriate," Miller said.
But a Giddens spokesman questioned whether Freeh could sue
MF Global's own employees.
"He has some inherent conflicts in opposing this motion
because individuals currently employed by MF Global Holdings are
defendants in the litigation," spokesman Kent Jarrell said in a
statement.
Bankruptcy Judge Martin Glenn will consider Giddens' plan,
and the objections to it, at a Sept. 5 hearing.
Freeh in court filings called for cooperation between the
two trustees, saying they have more important things to worry
about than claims against Corzine -- namely a lawsuit in the
U.K. over Giddens' attempt to recover $700 million from the
coffers of MF Global's U.K. affiliate for the benefit of U.S.
customers.
"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," Freeh
said. Freeh's objection was supported by MF Global's unsecured
creditors' committee.
Separately, a group of MF Global bondholders also objected,
arguing that customers would lack incentive to pursue claims
against the executives that could benefit other creditors.
The bankruptcy is In re MF Global Holdings Ltd, U.S.
Bankruptcy Court, Southern District of New York, No. 11-15059.
The liquidation of MF Global's broker-dealer unit is In re
MF Global Inc, U.S. Bankruptcy Court, Southern District of New
York, No. 11-2790.
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