DOJ balks at MF Global advisers' fees
* U.S. Trustee objects to $1.85 million of $14 million in fees sought
* Professional fees are major priority for bankruptcy regulator
By Nick Brown
NEW YORK, April 11 (Reuters) - The Department of Justice is objecting to about $1.85 million in professional fees in MF Global's wind-down, including more than $500,000 for the primary law firm that represents bankruptcy trustee Louis Freeh.
The U.S. Trustee Program, the DOJ's bankruptcy watchdog, lodged court papers on Thursday criticizing compensation applications from a slew of professionals for entries like vague time records, travel expenses and meal charges.
In total, eight firms sought about $14 million in interim fees for work done between Oct. 1 and Jan. 31. That includes about $4 million from Morrison & Foerster, the law firm representing Louis Freeh, the former FBI chief and trustee in charge of winding down MF Global's estate.
The DOJ objected to about $503,000 of the firm's fees and expenses, complaining of messy time records and high charges for trainees not yet admitted to practice law. Morrison & Foerster partner Brett Miller had no immediate comment.
The U.S. Trustee commonly objects to professional fees because the more money advisers make, the less is available to repay creditors. The issue has been even hotter lately, with the U.S. Trustee planning to launch new guidelines that increase disclosure requirements for compensation requests.
Money matters are especially sensitive in MF Global because the case became a political firestorm after regulators discovered that the commodities broker had misappropriated money in the accounts of trader customers, leading to a shortfall in customer accounts. Customers are expected to eventually recover all of their money.
Run by former New Jersey Governor Jon Corzine, MF Global is liquidating after filing for bankruptcy in 2011 when investors were spooked by its exposure to European sovereign debt. Its creditor payback plan was approved last week in U.S. Bankruptcy Court in Manhattan.
Other firms advising Freeh as well as MF Global creditors, including Pepper Hamilton LLP and Proskauer Rose LLP, also drew objections from the U.S. Trustee on Thursday to fee applications.
The Trustee's largest gripe was with Capstone Advisory Group, financial adviser to MF Global's creditors' committee. The Trustee took issue with about $541,000 of Capstone's roughly $2 million application, citing vague time records and too many attendees present at routine meetings.
A spokeswoman of Capstone could not immediately be reached. The firm earlier this year was in hot water with the U.S. Trustee in a different case -- the bankruptcy of investment management firm GSC Group Inc -- where it settled allegations of covering up potential conflicts of interest with one of its contractors.
The case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059
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