* Court approves June 8 deadline for trustee Giddens to file
* Giddens and his law firm getting paid monthly
* Court can retroactively reject fee requests
* Fees coming out of MF Global Inc estate
By Nick Brown
April 10 Former MF Global customers
will have to wait a little longer than expected to learn how
lucrative the broker's liquidation has been for trustee James
Giddens and his law firm.
A bankruptcy judge on Monday approved a June 8 deadline
requested by Giddens for reporting fees and expenses to the
court, meaning the bankruptcy could be in its eighth month
before fees are made public.
Giddens had initially gained court approval for a schedule
under which his firm, Hughes Hubbard & Reed, would submit its
first fee report in March or April. The schedule was revised to
bring all lawyers and advisers in the case onto the same filing
time table, Giddens' spokesman, Kent Jarrell, said on Monday.
While long, the time frame is not unheard of, and would be
about on par with the first fee reports in other major
bankruptcies, including the liquidations of Lehman Brothers
and Bernard Madoff's fraudulent fund.
But issues related to money in MF Global's bankruptcy are
especially sensitive because the broker's former trader clients
are missing an estimated $1.6 billion, which vanished from their
accounts as the company hurtled toward bankruptcy.
Hughes Hubbard has been getting paid from the corporate
estate of MF Global Inc, the company's broker-dealer unit. That
estate is separate from assets deemed to be customer property.
Giddens, the lawyer tapped to lead recovery efforts,
initially faced criticism from customers who felt high hourly
rates could be disincentives to a speedy recovery.
Hughes Hubbard has billed nearly $170 million in three and a
half years in the liquidation of Lehman Brothers' broker-dealer,
which it also leads. While a comparison is tenuous given
differences in the scopes of the cases, Giddens' hourly rate for
Lehman -- $891, including a 10 percent discount -- should remain
about the same.
Giddens and his legal team have accepted 10 percent rate
reductions in MF Global under Hughes Hubbard's agreement with
the Securities Investor Protection Corp, an insurance fund for
securities customers that taps trustees like Giddens to
liquidate failed brokers.
Some expenses normally billable to bankruptcy estates,
including many meals and taxi rides, are not billable under the
firm's agreement with SIPC, Jarrell said.
The Jon Corzine-led MF Global went bankrupt on Oct. 31 after
revealing exposure to risky European debt. Giddens in February
said the broker improperly used customer money to fund corporate
transactions as it sank, creating a roughly $1.6 billion hole in
STILL GETTING PAID
Hughes Hubbard is still receiving payments. According to
court papers, the firm each month submits fees to SIPC and,
pending the agency's approval, is immediately eligible for 85
percent of its fees, with the rest paid after bankruptcy court
The firm must seek cumulative court approval of fees every
four to five months, with creditors given the chance to voice
objections, Jarrell said. Courts can reject fees as
unreasonable, duplicative, unnecessary or otherwise improper.
If fees were rejected after being paid, Hughes Hubbard would
likely credit the total toward future bills rather than give
money back, Jarrell said.
Jarrell declined to reveal Hughes Hubbard's earnings so far
but said the money is being paid from the corporate assets of MF
Global Inc. SIPC, which has $1.5 billion in its coffers, would
pay the fees if MF Global's bankruptcy estate could not fund
them, the agency's CEO, Stephen Harbeck, told Reuters.
Some customers have argued they should be entitled to the
broker's corporate assets ahead of Giddens as a result of MF
Global's mishandling of their money, creating potential discord
over Giddens' fee requests.
But other customer groups have backed off those demands.
"Our attorneys just told us, 'No way, that's not going to
happen,'" John Roe, a spokesman for advocate group the Commodity
Customer Coalition, said on Tuesday. "It's just not the way
bankruptcy works. Trustees have to be paid."
The coalition is still trying to reduce the cost of the case
by other means, most notably by pushing to convert it to a more
streamlined liquidation under Chapter 7 of the bankruptcy code,
"Certainly we think we could have gone through Chapter 7
quickly and more cheaply," Roe said.
The liquidation is In re MF Global Inc, U.S. Bankruptcy
Court, Southern District of New York, No. 11-2790.