MF Global trustee must prove "disinterestedness"

Wed Dec 7, 2011 6:55pm EST

(Reuters) - Bankruptcy Judge Martin Glenn said he needs more information from James Giddens, the trustee winding down bankrupt brokerage MF Global MFGLQ.PK, to determine if Giddens has a conflict of interest in the case.

Giddens has been accused by some customers of having a conflict because of past work done for JPMorgan Chase & Co (JPM.N), a key lender to MF Global.

Giddens' law firm, Hughes Hubbard & Reed, previously disclosed that it worked for JPMorgan in 2009 and 2010 but said that revenue from the work was less than one-tenth of 1 percent of the firm's total annual revenue.

Giddens disclosed those details after Glenn ordered him to describe the relationship. The judge said in an order on Wednesday that he would require further disclosures to make a determination on a potential conflict of interest.

JPMorgan is agent to a $1.2 billion loan to the brokerage's parent, MF Global Holdings Ltd, and is allowing the company to fund its bankruptcy using cash securing a loan.

Previous court filings do not "clearly disclose whether JPM is a current client of" Hughes Hubbard, Glenn said on Wednesday. "The status of an entity as a current client (as opposed to a former client) can make an important difference in evaluating conflicts and disinterestedness," Glenn wrote.

A spokesman for Giddens said the trustee believes his role in the case is appropriate.

"There are already existing procedures in place to deal with any apparent conflicts," spokesman Kent Jarrell said. "Of course we will be submitting answers to questions asked by the court."

The judge gave Giddens until December 12 to provide more specific information.

As trustee, Giddens has the job of sorting through the assets of the failed brokerage and recovering money on behalf of its customers.

The liquidation is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.

(Reporting by Sue Zeidler in Los Angeles; Editing by Steve Orlofsky)

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