Former Federal Bureau of
Investigation Director Louis J. Freeh was appointed Chapter 11
trustee in the MF Global Holdings Ltd. (MF) bankruptcy after the
company and creditors said one person should take charge of
recovering assets.
Such a trustee would coordinate globally with regulators
and advocate for a prompt return of creditor funds, according to
court filings. A trustee to guide the search for assets would be
more cost-effective than the company or its lenders, MF Global
and its creditors have said. The appointment was filed today.
Customer accounts of MF Global Inc., the broker-dealer unit
of parent MF Global Holdings believed to hold $5.45 billion,
were frozen Oct. 31. That day, the New York-based company
reported a shortfall in funds required to be segregated under
U.S. Commodity Futures Trading Commission rules. About
$1.2 billion in customer funds are believed to be missing,
according to James Giddens, the trustee appointed to liquidate
the broker-dealer and distribute refunds to its customers.
MF Global Holdings, which was run by former New Jersey
Governor and ex-Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine,
filed for bankruptcy protection to apportion returns to its
creditors, including bondholders and lenders.
FBI Director
Freeh served as director of the FBI under U.S. President
Bill Clinton from 1993 to 2001. He had previously worked as an
FBI agent and later became a federal prosecutor and judge,
appointed to the bench in 1991 by President George H. W. Bush.
His appointment as MF Global’s trustee must be approved by
U.S. Bankruptcy Judge Martin Glenn, who is presiding over the
bankruptcy. The request was made in court papers filed in
Manhattan.
Freeh stepped down from the FBI in 2001. In 2007, he formed
a New York-based risk management company, Freeh Group
International Solutions LLC., and started a law firm, Freeh,
Sporkin & Sullivan LLP. Since then, he’s served as an
independent monitor in a Justice Department probe of Daimler AG
in 2010, and headed a 2008 investigation of energy trading
losses that led to the bankruptcy of SemGroup LP.
Freeh also was hired this week to conduct an independent
probe of the child sex-abuse scandal at Pennsylvania State
University. Additionally, his company was retained by the
Educational Testing Service of Princeton, New Jersey, and the
New York-based College Board to review security for the SAT
college-admissions test.
No Conflicts
His firms don’t have any conflicts that should prevent him
from being trustee for MF Global, Freeh said.
“I do not personally have any connection with any
interested party in these cases,” Freeh declared in court
papers, citing minor exceptions including work his law firm has
done for Bank of America Corp., making up less than 1 percent of
its revenue to date.
Freeh must obtain a bond valued at no less than $26 million,
according to court records. Such bonds are required to be posted
within five days of a trustee being selected, according to a
handbook for trustee’s posted by the Justice Department.
The brokerage case is Securities Investor Protection Corp.
v. MF Global Inc., 11-02790, U.S. District Court, Southern
District of New York (Manhattan). The parent’s bankruptcy case
is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court,
Southern District of New York (Manhattan).
To contact the reporters on this story:
Chris Dolmetsch in New York at
cdolmetsch@bloomberg.net;
Tiffany Kary in New York at
tkary@bloomberg.net.
To contact the editor responsible for this story:
Michael Hytha at mhytha@bloomberg.net.
