MF Global judge wary of letting customers depose Corzine

Wed Dec 19, 2012 11:38am EST

* Doubts whether customer group has standing to depose

* Says any depositions should be coordinated with other suit

* Customers want to question Corzine about missing funds

By Nick Brown

NEW YORK, Dec 19 (Reuters) - A bankruptcy judge responded on Wednesday with skepticism to a request by former MF Global customers to depose the collapsed brokerage's former chief Jon Corzine.

At a hearing in U.S. Bankruptcy Court in Manhattan, Judge Martin Glenn said he doubted whether the Commodity Customer Coalition, a grassroots advocate group for customers hurt by MF Global's 2011 bankruptcy, had legal standing to subpoena and depose Corzine and other former executives.

"The coalition is not a creditor" of MF Global even though it represents customers who are creditors, Glenn said. "It is an inanimate entity."

Glenn said he would wait to make an official ruling.

MF Global declared bankruptcy in October 2011 after its heavy exposure to European sovereign debt spooked investors. The case has become a political fire storm as investigators in congress and elsewhere try to identify the source of an estimated $1.6 billion hole in customer trading accounts.

Many officials, including the Department of Justice and the FBI, have been investigating the case and have spoken to MF Global executives.

Corzine's role has been unclear, though the former Goldman Sachs chief executive and former Democratic New Jersey governor and senator has denied wrongdoing.

James Giddens, the trustee liquidating MF's broker-dealer unit, said in a June report that Corzine failed to address growing liquidity needs as he built the firm into a global investment powerhouse, using customer funds to cover liquidity gaps as the firm teetered on the brink.

The Commodity Customer Coalition last month sought permission to depose Corzine, Chief Financial Officer Henri Steenkamp, former Chief Operating Officer Bradley Abelow, General Counsel Laurie Ferber, former Treasurer Edith O'Brien, and Christine Serwinski, former finance chief at MF's North American brokerage.

The request was opposed by many parties in the case, but supported by futures industry watchdog the National Futures Association and by commodities broker R.J. O'Brien.

Glenn said any depositions, if ultimately approved, should be coordinated with plaintiffs in a separate federal court lawsuit accusing Corzine of breaching fiduciary duties. Glenn said he plans to confer next month with the judge in that case as to whether such discovery is appropriate.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts, which were frozen when the company went bankrupt.

Reuters reported in September that prosecutors are close to wrapping up a criminal inquiry into MF Global's collapse and are unlikely to file criminal charges.

The liquidation of MF Global's North American brokerage is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790. MF Global's bankruptcy case is In re MF Global Holdings Ltd, in the same court, No. 11-15059. (Reporting By Nick Brown; Editing by Tim Dobbyn)