The Commodity Customer Coalition (CCC) called on the Senate Committee on Banking, Housing and Urban Affairs to persuade MF Global Holding Ltd. Trustee Louis Freeh to convert the MFGH bankruptcy proceeding from Chapter 11 to Chapter 7.
The letter, sent yesterday to the members of the committee, stated, “…we contend that Mr. Freeh is keeping an administratively insolvent firm in Chapter 11. Whatever his motives for doing so, Mr. Freeh's actions are adversely affecting the prospects of recovery for farmers, ranchers, investors and industrial concerns whose money was purloined by MF Global.”
It goes on to state that MFGH is insolvent and has no place in a Chapter 11 proceeding. “There are apparently no assets at the estate of MFGH, as Trustee Freeh has filed no schedule of assets nearly six months after the debtor's filing for Chapter 11 protection. Chapter 11 bankruptcy protections are designed to allow firms to deal with their creditors and reemerge from bankruptcy as functioning businesses. No subsidiary, affiliate or parent in the MF Global mess will survive bankruptcy to conduct business.”
The letter also accuses Freeh of unnecessarily slowing down the process by filing claims to customer property. “For each claim Mr. Freeh files, the SIPA Trustee must reserve property under his control against these claims. …These claims— that the holding company somehow can subordinate and abscond with property which belongs to customers of MFGI — have no basis in law. These frivolous claims are a tremendous waste of the limited resources of the SIPA Trustee, as well as those of the Bankruptcy Court.”
The letter goes on to state that Chapter 11 allows MFGH creditors, which includes the two largest U.S. banks, to have their legal expenses paid by the MFGH estate while former customers of MF Global must pay their own expenses.