NEW YORK May 12 Lawyers for defunct brokerage MF Global on Monday asked a U.S. bankruptcy judge to impose procedures to limit mounting legal fees incurred by Jon Corzine and other former company insiders in litigation over their role in MF's 2011 collapse.
James Giddens, trustee for MF's former broker-dealer unit, and Bruce Bennett, a lawyer for its defunct parent company, in court papers said former Chief Executive Officer Corzine, former Chief Operating Officer Bradley Abelow and other ex-insiders are mounting exorbitant legal bills through excessive defense tactics.
The filings came in response to requests last month by the insiders for a $10 million increase, from $30 million to $40 million, on the money they are allowed to tap from MF Global insurance policies to fund their defense costs.
In separate letters to Judge Martin Glenn in U.S. Bankruptcy Court in New York, Giddens and Bennett said the request should only be approved if reporting requirements are put in place to ensure adequate oversight and cost control. More money devoted to legal fees means less for other MF Global creditors.
The insiders face a handful of lawsuits seeking to hold them accountable for MF Global's 2011 collapse, in which about $1.6 billion went missing from customer accounts after the firm improperly used it to try to plug liquidity gaps as it teetered on the brink. Customers eventually received full recovery, though other creditors have not.
Giddens said the insiders have dragged the cases out, making no effort to streamline discovery and objecting to cost-reduction proposals such as deactivating computer systems that are no longer needed.
Lawyers for the insiders said they have tried to keep costs down. "Even with extensive coordination, a proper defense will require intensive work," Arthur Aufses, a lawyer for some of the insiders, said in an April 29 letter to Judge Glenn.
A hearing on the matter is set for May 19. (Reporting by Nick Brown; Editing by Lisa Shumaker)