MF Global Freeh Group hiring doesn’t comply with law, US says

March 19 (Bloomberg) -- MF Global Holdings Ltd.’s hiring of consultant Freeh Group International Solutions LLC doesn’t comply with the bankruptcy code, said the U.S. Trustee, a Justice Department arm that oversees bankruptcies.

Former Federal Bureau of Investigation director Louis Freeh, MF Global Holdings’ Chapter 11 trustee, sought permission to hire the consulting firm along with his law firm, Freeh Sporkin & Sullivan LLP. The law only allows a trustee to hire a law firm or accounting firm to protect the trustee’s disinterestedness, U.S. Trustee Tracy Hope Davis said in papers filed today in U.S. Bankruptcy Court in Manhattan.

“Such inconsistency may be curable should FGIS be able to demonstrate that it is an accounting firm authorized under applicable law to practice public accounting,” Davis said.

U.S. Bankruptcy Judge Martin Glenn had approved six lawyers and consultants to work on the bankruptcy while asking for more information about whether Freeh Group could be hired.

MF Global Holdings, once run by former New Jersey Governor Jon Corzine, filed the eighth-largest U.S. bankruptcy on Oct. 31 after getting margin calls and bank demands for money at its operating unit, MF Global Inc. The brokerage and the parent are in different bankruptcy proceedings handled by two trustees.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Bloomberg News

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