* Trustee Giddens seeks permission to distribute $685 mln
* Hearing set for Thursday in Manhattan bankruptcy court
By Nick Brown
April 12 The trustee liquidating MF Global's
brokerage will ask a bankruptcy court on Thursday to
release $685 million to former MF Global customers, a plan
already introduced in court filings that has been criticized as
neglecting affiliates of the failed firm.
Trustee James Giddens is responsible for recovering as much
money as possible for customers, but his plan stands to be
criticized by Louis Freeh, the trustee managing the assets of MF
Global's parent company.
In March, Freeh said in a court filing that he supported the
distribution, but felt it evidenced neglect of claims from MF
Global affiliates in favor of those of public customers.
Freeh is responsible for recovering assets of MF Global's
corporate estate or to its creditors.
Commodities customers have received about 72 percent, or
$3.9 billion, of the value of their accounts, while affiliate
customers have not received any payback, according to Freeh.
The latest payout would raise recovery to about 80 percent
for commodities customers who traded on U.S. exchanges. They
would receive about $600 million. About $50 million would go to
customers who traded on foreign exchanges, with $35 million left
for certain customers holding physical items like gold bars.
Customer accounts were frozen when MF Global was forced into
bankruptcy after revealing exposure to risky European debt. In a
February report, Giddens said that MF Global had improperly used
customer money to cover corporate transactions, creating a
massive hole in client funds.
The size of that hole, which is uncertain, is a point of
contention for Freeh. He demanded in court papers that Giddens
do more to explain how he arrived at his estimate of a $1.6
billion shortfall when futures exchange CME Group Inc
has ballparked the gap at not being higher than $600 million.
MF Global's creditors' committee, which includes JPMorgan
Chase & Co and Bank of America Corp, piggybacked
on Freeh's attack in court papers last week, demanding more
transparency as a condition for approving Giddens payout plan.
Giddens countered that neither Freeh nor the creditors have
a stake in the issue, which pertains to public customer funds.
RELEASE OF CLAIMS
Also standing in Giddens' way are objections from customers
who have said the trustee's distribution would unfairly require
them to release potential legal claims against third parties and
assign those claims to Giddens.
Customers in court filings said they were wary of parting
with claims as a prerequisite to receiving money from Giddens,
and that they had not hired him and were not personally
obligated to him.
Giddens said the release applies only to claims related to
money already repaid to customers and would serve to minimize
duplication in the filing of legal claims.
The bankruptcy is In re MF Global Holdings Ltd, U.S.
Bankruptcy Court, Southern District of New York, No. 11-15059.
The brokerage liquidation is In re MF Global Inc, U.S.
Bankruptcy Court, Southern District of New York, No. 11-2790.