By Joseph Checkler
Former MF Global customers, as well as the administrator in
charge of the defunct brokerage, are fighting a bid by Jon S.
Corzine and other former MF Global executives to tap $7.5 million
of their errors-and-omission insurance policy to cover their
legal-defense costs.
In filings on Wednesday with the U.S. Bankruptcy Court in
Manhattan, both groups urged a judge not to raise the so-called
soft cap on the insurance policies, which Mr. Corzine and the
others requested last month, as lawsuits against them are becoming
more active.
The soft cap refers to the judge's power to limit how much of
the available insurance money can be tapped by the defendants at
one time.
The MF Global administrator said in its filing that "without
additional and significantly more detailed information, neither MF
[Global] nor the court has any basis for determining whether it is
reasonable to increase the soft cap by $7.5 million."
Lawyers for the former customers, who have for long fought the
use of insurance proceeds, said the money should go to the trustee
unwinding MF Global, "not to benefit individuals who caused the
harm."
An attorney for the various defendants, a group that also
includes former operating chief Bradley Abelow and other executives
and higher-level employees, didn't immediately respond to a request
for comment.
A hearing on the insurance money is set for Dec. 17.
More than a dozen former directors, officers and employees of MF
Global, including Mr. Corzine, MF Global's former chief executive,
are defending themselves against several civil actions and
regulatory proceedings related to the bankruptcy of the
broker-dealer in the fall of 2011.
Mr. Corzine, a former Goldman Sachs Group Inc. chairman and once
New Jersey's governor, has denied wrongdoing, as have the other
former executives.
A spokesman for Mr. Corzine couldn't immediately be reached for
comment on Thursday.
MF Global's bankruptcy judge, Martin Glenn, has already allowed
MF Global to tap most of the $200 million or so remaining on its
directors-and-officers insurance policy. The errors-and-omissions
policy is for about $150 million, according to court filings.
MF Global imploded just over three years ago, as investors fled
the firm after its bets on European sovereign debt came to light.
The exodus exposed what was believed to be a $1.6 billion shortfall
in customer accounts that should have been segregated from MF
Global's money pool. The shortfall has since been recovered, but
lawsuits against the company's former officials, and other
employees, remain.
Write to Joseph Checkler at joseph.checkler@wsj.com
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