MFGI Trustee Giddens reaffirms plan to cooperate with class action plaintiffs

Freeh and former MF Global officials object

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The trustee for MF Global Inc. filed a motion of support for its Aug. 15 agreement to cooperate and assign claims to class action plaintiffs. The claims stem from a civil action against directors and officers of MF Global.

The new motion is in response to objections by the Chapter 11 trustee for MF Global Holdings Ltd. (MFGH),  the Creditor’s Committee of MFGH and former officers, directors and employees of MFGI.

Louis Freeh, trustee for MFGH, in his objection called on the court to reject the motion and assign the general estate claims to the Chapter 11 trustee (Freeh) as a creditor representative.

John Witmeyer, attorney in the Sapere action against former MF Global executives (not part of class), filed a reply to Freeh's objection. In it Sapere argues that customer priority rules dictate that former customers of MFGI be made whole before claims of general creditors are considered.

The reply states, "Because of the priority scheme provided to public customers (under the Commodity Exchange Act), the Chapter 11 Trustee is not an appropriate person to be assigned MFGI’s general estate causes of action."

The Chapter 11 objection seemed to dispute customer priority rules. It stated, "Notwithstanding the fact that the SIPA Trustee owes fiduciary duties to both customers and creditors equally, the Motion is quite clear that the only intended beneficiaries of the Motion and the Agreement are MFGI’s customers."

The new MFGI motion states: “The Agreement reflects a creative approach to streamlining claims against possible defendants, while maximizing recovery from a limited fund of assets, consisting in large measure of dwindling insurance policies.”

Download the motions and objections below:

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