(Reuters) - A U.S. congressman is pressing for the appointment of an independent counsel to take over a federal criminal probe into the collapse of the MF Global Holdings Ltd MFGLQ.PK brokerage firm.
Michael Grimm, a first-term Republican congressman from New York City and member of the House Financial Services Committee, has circulated to colleagues a proposed letter that would ask U.S. Attorney General Eric Holder to step aside.
Grimm hopes to gain broad bipartisan support before sending the letter to Holder next week, a spokeswoman for the congressman said on Thursday.
The move comes roughly six months after MF Global filed for bankruptcy, and its customers learned that money in their accounts had disappeared. A trustee for the company's main brokerage unit estimates that the shortfall is $1.6 billion.
MF Global had been run by Jon Corzine, a former Democratic U.S. senator and governor of New Jersey.
Grimm's letter, earlier reported by Fox Business News, suggests that Corzine's ties to Washington, including with "highly placed individuals" in the government who are "very close" to the U.S. Department of Justice probe, warrants the naming of an independent counsel.
Federal law authorizes such an appointment when a Justice Department probe "may result in a personal, financial or political conflict of interest," the letter said. "Clearly the case of MF Global and Mr. Corzine falls under this section."
The Commodity Customer Coalition, an advocate group for former MF Global clients, supports the effort to push the DOJ aside as customers remain without full access to their money.
"There's 38,000 MF Global customers still missing property," James Koutoulas, the coalition's leader, told Reuters. "I don't think the DOJ is going to go up against one of the president's biggest bundlers without an independent counsel being appointed."
Coalition members, including Stanley Haar, an adviser whose clients had about $10 million tied up in MF Global, had met with congressmen and their staffs in hopes of gaining support for an independent prosecutor.
"We tried to play an information role," Haar said. "We felt like, once congressmen and others were presented with a clear picture of the facts, like anyone else, they'd see signs of cronyism and favoritism."
While there is "no direct evidence" that anyone is getting special treatment in the MF Global probe, "perception matters," Grimm's letter added.
Randall Samborn, a Justice Department spokesman, declined to comment. Andrew Levander, a lawyer for Corzine, also declined to comment.
Rep. Randy Neugebauer, a Texas Republican who chairs the House Financial Services subcommittee investigating MF Global's collapse, has not signed Grimm's proposed letter, a person familiar with the matter said on Thursday.
Before joining the House of Representatives, Grimm had been an FBI agent for 11 years.
Congress has heard testimony from Corzine and other officials, including from the company's main bank, JPMorgan Chase & Co (JPM.N), about MF Global's last days prior to its October 31 bankruptcy.
Corzine testified that he did not order anyone to withdraw money from customer accounts, and did not know where the missing funds were.
MF Global officials including Corzine have been hit with many lawsuits by former customers and shareholders.
Among them is Sapere Wealth Management LLC, a commodities customer that is appealing a bankruptcy court ruling allowing MF Global officials to tap insurance to cover their legal bills. Sapere prefers that insurance money be reserved for customers.
"After more than six months, there is no indication of any meaningful government investigation," Sapere's lawyer, John Witmeyer, said in an interview. "Whether or not the law requires an independent investigator, it would certainly be prudent to appoint one."
The cases are In re: MF Global Holdings Ltd et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059; and In re: MF Global Inc in the same court, No. 11-02790.