From the April 01, 2012 issue of Futures Magazine • Subscribe!

MFGH trustee thwarts clients

Privileged execs

In February, after a long battle, MF Global Holdings (MFGH) Trustee Louis Freeh agreed in essence to a partial waiver of client/attorney privilege regarding certain documents related to the holding company’s bankruptcy. 

Many former MF Global bankruptcy customers wanted more information to be released and filed objections to the “stipulation” filed by Freeh, but bankruptcy judge Martin Glenn approved the stipulation in March.


John Witmeyer, attorney for one of the objectors, points out that no information has been released as of the March motion and that the stipulation was not a waiver of client/attorney privilege but simply an agreement between the two MF Global trustees as to how information would be shared. 

The objection filed by a group of customers was broadly labeled “Futures Customers” and stated, “The customers of MFGI are in a race against the clock to recover funds stolen from their accounts. The Court must carefully limit any stipulation that would allow the Creditors’ Committee, the trustee, or the debtors to restrict customers’ access to information critical to recovering these funds. “ 

Witmeyer represents Sapere Wealth Management, Granite Asset Management and Sapere CTA Fund. Sapere previously had filed a motion asking the judge to alter the structure of the bankruptcy to put MFGH under futures industry rules, which would have returned commodity customer priority over all funds held by the holding company as well as the broker. The filing, which was rejected and is under appeal, also called for a Bankruptcy Rule 2004 examination to be ordered, which would allow broad discovery of all relevant documents related to MF Global and the trustee’s investigation. 

The frustrating element for Witmeyer and others is that a government-appointed trustee could hold back information in a criminal case, which this is as acknowledged by the judge. 

“It is astounding that they are holding anything back,” Witmeyer says. “It is astounding that he didn’t open this up to everyone. It is a shame that a trustee would assert priority.” 

Witmeyer also is pursuing what he estimates to be several hundred million dollars in insurance policies taken out by MFGH for its executives. Witmeyer and other customer advocates would like that money to go to MF Global customers. “The trustees want to allow it to pay for the defense [of MF Global officers]; we want it to pay for victims’ claims,” he says. 

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