Judicial Watch the right leaning public interest group that investigates public corruption announced on Aug. 7 that on July 18, 2012, it filed a Freedom of Information Act (FOIA) lawsuit (Vern McKinley v. Commodity Futures Trading Commission and Securities and Exchange Commission (No. 1:12-cv-01176)) against the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) seeking records related to internal discussions involving the bankrupt company MF Global Holdings Ltd.
According to a press release the lawsuit filed on behalf of Vern McKinley, a former employee of the Board of Governors of the Federal Reserve and the Federal Deposit Insurance Corporation, “Focuses specifically on an Oct. 31, 2011, meeting of the Treasury Department’s Financial Stability Oversight Council (FSOC), during which MF Global was reportedly discussed.”
They are seeking “…copies of any and all records concerning this update of MF Global, the discussion of the implications for the broader financial system, and any follow up contact and discussions on public statements. Such records include, but are not limited to, detailed meeting minutes, meeting notes, supporting memoranda, communications, and electronic messages and attachments.”
According to the Judicial Watch statement, the CFTC and SEC have both failed to respond to the FOIA request even though they were required by law to respond by May 23.
The CFTC and SEC put out a joint release on Oct. 31 stating that “The SEC and CFTC have determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets.”
Later several CFTC officials including Commissioner Jill Sommers in congressional testimony, stated that the law required MF Global Inc. to go through SIPC.
While MF Global Inc. was put in the hands of a SIPC trustee, the parent MF Global Holdings was allowed to operate separately in a Chapter 11 proceeding. It has later been learned that an attorney for the Holdings company refuted public reports to a bankruptcy judge that there was a shortfall in customer funds even though this was clearly the case. Representatives of both the CFTC and SEC were at this Nov. 1 hearing and did not correct the record.
Many MF Global customer advocates have maintained from the beginning that MF Global should be treated as one entity as it acted as a joint Futures Commission Merchant and Broker/Dealer and should have not been allowed to have separate bankruptcy proceedings.