03.15.12

Leahy And Ag Panel Colleagues Draw A Line: No Bonuses For MF Global Execs

Bipartisan Letter Urges Bankruptcy Trustee Not To Seek Bonuses For Officials Of Failed Firm

WASHINGTON (THURSDAY, March 15) -- Senator Patrick Leahy (D-Vt.) and the entire membership of the Senate Agriculture Committee are asking the trustee overseeing the bankruptcy of MF Global Holdings to kill the idea of awarding bonuses to the firm's top executives, who the senators say should be held accountable for any roles they played in the firm's spectacular and costly failure.

The letter by the Senate committee's members to former FBI Director and former federal judge Louis Freeh - the trustee overseeing the bankruptcy case - is headed by Senator Debbie Stabenow (D-Mich.), who chairs the Committee on Agriculture, Nutrition and Forestry, and Senator Pat Roberts (R-Kansas), the committee's top Republican member.  Leahy is the panel's most senior member of either party.

MF Global's bankruptcy last year, the eighth largest in U.S. history, resulted in an estimated $1.6 billion in missing customer funds.  Thousands of farmers, ranchers and small business owners are still owed tens of thousands or even hundreds of thousands of dollars.  In testimony last December, executives of the now-fallen firm told the panel they did not know where the money went.

The senators' letter strongly urges Freeh not to ask the bankruptcy court overseeing MF Global Holdings' insolvency to pay the large contemplated bonuses to top executives of the now-defunct company.  They wrote, "It is difficult to understand why you would even consider paying anyone a bonus while nearly $1.6 billion in customer money is still missing.  And it is absolutely outrageous to propose paying bonuses to the very people who were responsible for the firm's operational, legal, and financial management at the time customer money disappeared ... the failure of leadership in this case is truly unprecedented."

Investigators from the Justice Department, the FBI, the Securities and Exchange Commission and the Commodities Futures Trading Commission are still scrutinizing the role these same executives played in the company's mismanagement and ultimate collapse.  Key executives and others at MF Global are accused of co-mingling customer funds and initiating money transfers that have resulted in a $1.6 billion shortfall in customer accounts.  So far the firm's innocent investors have yet to be made whole, and the proposed bonuses could reduce the amount of money available to repay MF Global's customers, the rightful owners of the funds.

In separate comments Leahy said, "These are the same executives who ran the ship aground, leaving farmers and other investors in the lurch.  Why on Earth should these people be rewarded when so many customers have yet to receive the money that is rightfully theirs?"

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To view a PDF of the letter, please click here.

(The full text of the letter is below.)

March 15, 2012

The Honorable Louis Freeh

Chapter 11 Trustee, MF Global Holdings, Ltd, c/o Freeh Group International Solutions, LLC

1185 Avenue of the Americas, 30th Floor

New York, NY 10036

Dear Judge Freeh:

We are deeply troubled by media reports that you are considering seeking permission of the court to pay enormous bonuses to top executives of the now-bankrupt MF Global Holdings.  It is difficult to understand why you would even consider paying anyone a bonus while nearly $1.6 billion in customer money is still missing.  And it is absolutely outrageous to propose paying bonuses to the very people who were responsible for the firm's operational, legal, and financial management at the time customer money disappeared.

A fundamental principle of commodities trading is that the firm's money must be accounted for separately and segregated from customer money.  Throughout the long history of futures markets, no firm has ever lost customer money of this magnitude - until MF Global.  The failure of senior management in this case is truly unprecedented.

When one of these executives testified before our committee, under oath, he admitted that, knowing what he knows now, he could not certify that MF Global had appropriate financial controls in place.

Most egregiously , the proposed bonuses could not only reduce the amount of money available to repay MF Global customers, but the bonuses would be based on how much these executives have been able to recover for the firm's creditors, not the firm's customers.  The executives who would receive these bonuses should be held accountable for the failure of their company, not rewarded for diverting even more money away from customers.

Thousands of MF Global customers still have not received their missing money.  Giving bonus checks to the very people who lost that money is offensive on its face.  We strongly urge you to reconsider your decision to seek bonus pay for MF Global executives.

Sincerely,

[Signed by all members of the U.S. Senate's Committee on Agriculture, Nutrition, and Forestry]

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