Andrew Harrer/Bloomberg NewsJames W. Giddens, trustee of MF Global Holdings.The trustee overseeing the return of more than $1 billion in missing customer money after the collapse of MF Global shed new light on the firm’s disastrous last days, detailing its rapid downfall and taking aim at those at the center of the scandal in a 275-page report released on Monday.
Foreshadowing potential litigation to recover money for customers, the report takes aim at several top executives at the brokerage, including its former chief executive, Jon S. Corzine. It also focuses on banks like JPMorgan Chase that received customer money in the chaotic days before the firm went under. The trustee, James W. Giddens, said he would decide whether to pursue such actions within 60 days.
“In light of these conclusions, I have determined there may be valid claims against individuals and entities,” Mr. Giddens said in a statement. “In my capacity as trustee, I will make every effort to ensure that such claims result in the greatest possible returns to customers in an efficient and fair manner, whether those claims are pursued by my office or others.”
The report, based on interviews with more than 100 people and the review of hundreds of thousands of documents, is the most comprehensive telling to date of the MF Global bankruptcy. The findings focus on the tenure of Jon S. Corzine, a former Democratic governor of New Jersey who became MF Global’s chief executive in early 2010 and immediately began transforming it from a sleepy commodities brokerage firm into a something more akin to a mini Goldman Sachs.
Documents: Report From MF Global Trustee“As attempts were made to transform MF Global into a full-service global investment bank, management failed to add to its Treasury Department and technology infrastructure, which was needed to meet the demands on global money management and liquidity,” Mr. Giddens said in a statement. “My investigation has concluded that management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions.”
In the days before MF Global filed for bankruptcy on Oct. 31, the firm misused client funds to meet its own obligations. Since then, farmers, hedge funds and other customers have been without at least a third of their money.
As expected, the report takes Mr. Corzine and others at the firm to task for “negligence” in the downfall of MF Global. In addition to Mr. Corzine, the trustee also mentions Henri Steenkamp, the chief financial officer, and Edith O’Brien, an assistant treasurer who has become the focus of government investigations. The report states that the trustee believes there are “claims for breach of fiduciary duty and negligence, that may be asserted” against the three officials.
The report also highlights the banks and other companies on the receiving end of transfers involving customer money. Mr. Giddens specifically names JPMorgan Chase, which has already returned some money to the trustee. As MF Global’s main bank, JPMorgan was a central recipient of customer money in that final week. The trustee noted in his report that the bank was cooperating with his investigation.
Other banks in the trustee’s line of sight include Bank of New York Mellon, which is also cooperating with the investigation.
The trustee also said he was investigating the “conduct” of a major clearinghouse, the Depository Trust Clearing Corporation, that processed trades in the final weeks of the firm’s existence. That conduct includes the clearinghouse’s demands for additional cash from MF Global to clear trades, money that may have belonged to customers.
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