MF Global Holdings Ltd. and the trustee unwinding its brokerage
are going after more than $3 million in severance payments made to
MF Global's former head of fixed income right before the company
imploded two years ago.
In a Thursday lawsuit filed with U.S. Bankruptcy Court in
Manhattan, the administrator for MF Global and the trustee, James
W. Giddens, said they want Peter McCarthy to pay back the severance
payments made on Sept. 30, 2011, and Oct. 14, 2011. MF Global filed
for bankruptcy Oct. 31 of that year.
"The Defendant has benefited in the amount of millions of
dollars at the expense of the Plaintiffs, and the Defendant has
knowledge thereof," lawyers said in the complaint. The lawyers,
add, "Equity and good conscience demand the return of these assets
to the Plaintiffs, or an award of damages equivalent to the value
of such assets."
Mr. McCarthy, who left the company before its collapse, couldn't
immediately be reached for comment.
The Bankruptcy Code allows estates to claw back money it paid
out in the months--or in some cases, years--before its Chapter 11
filing. In the case of Mr. McCarthy's severance payments, MF Global
and Mr. Giddens said they can go after the money because it was
paid within 90 days of MF Global's bankruptcy, and within one year
of the bankruptcy filing of MF Global Holdings USA Ltd., another
company subsidiary.
Individual customers of MF Global's brokerage, which is being
managed by Mr. Giddens, have already recovered most of the funds
that were caught up in the firm's collapse but both he and the
administrator unwinding MF Global's estate continue to search for
more. Next week, Mr. Giddens will ask a judge if he can pay out the
rest of the customer money.
For creditors of the brokerage's parent company, a judge
approved a proposal earlier this year that would pay holders of
about $1 billion in MF Global's unsecured bonds between 12 cents
and 42 cents on the dollar for their claims, with claims stemming
from a $1.2 billion revolving loan recovering between 27% and
80%.
Still, Jon S. Corzine, the former Goldman Sachs Group Inc. (GS)
chairman and New Jersey governor who led MF Global, is facing
multiple lawsuits over the implosion, including ones from former
customers, the litigation trust representing MF Global and the
Commodity Futures Trading Commission. Mr. Corzine and other accused
executives have denied any wrongdoing.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to )
Write to Joseph Checkler at joseph.checkler@wsj.com
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