MF Global’s U.S. trustee considering suits against U.K. staff

July 24 (Bloomberg) -- The bankruptcy trustee of MF Global Holdings Ltd. is seeking to interview former London employees of the failed broker as it considers lawsuits against the U.K. unit and its staff.

Louis Freeh, the trustee for MF Global’s parent company in New York, is seeking to recover at least $233 million that was transferred into the U.K. in the days before the brokerage’s collapse, according to papers from a July 20 London court hearing. Those payments “may give rise to substantial claims” against the company or employees, Freeh’s lawyers said in the documents.

Former MF Global Chairman Jon Corzine, and other executives who oversaw $6.3 billion in trades on European national debt, may face negligence lawsuits in the U.S. for their role in the company’s downfall, according to a June report by the separate trustee for the MF Global Inc. brokerage arm. The trades led to margin calls and credit downgrades before the firm filed the eighth-largest U.S. bankruptcy in October.

Lawyers for Freeh appeared at a London court hearing on July 20 to seek permission to bring claims in the U.K., and work out a schedule for litigation. Freeh is seeking several hundred million dollars from MF Global UK Ltd. for internal repurchase agreements used to move money to the U.K. unit to meet margin calls.

Serious Allegations

“The trustee has raised a number of serious allegations to bolster his claim” without specifying exactly what the claim is, Richard Heis, the insolvency administrator for the U.K. unit, said in an e-mail. “The trustee’s actions are unhelpful and are likely to achieve little more than to delay the return of cash to MF Global UK creditors.”

Freeh’s spokeswoman, Diana DeSocio, declined to comment.

In the summer of 2011, MF Global UK staff told the British Financial Services Authority they had sufficient liquidity to meet the margin calls, even though they knew the firm wouldn’t be able to cope with requests for $900 million, Freeh’s lawyers said in court papers.

FSA spokesman Chris Hamilton declined to comment on the claim.

Freeh has made contact with at least 11 former MF Global UK employees including its former European treasurer Russell Haley, his lawyers said in court documents. They haven’t co-operated with requests for interviews.

Duncan Aldred, a lawyer at London firm CMS Cameron McKenna LLP who is representing former employees of MF Global UK, declined to comment through the firm’s spokeswoman. Haley didn’t respond to a phone message seeking comment.

Disputes between MF Global’s U.K. administrators KPMG LLP and the various trustees of the U.S. entities have tied up about $1 billion that can’t be returned to clients or creditors until courts decide to whom it belongs.

KPMG has only been able to pay out about 26 percent of the money frozen in client accounts when the broker collapsed, while its U.K. creditors haven’t received anything. Last week, the firm got court approval to start returning shares and other securities held on behalf of clients by MF Global UK.

Bloomberg News

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