By Joseph Checkler
Former FBI Director Louis J. Freeh wants a $1 million fee for
leading the bankruptcy wind-down of MF Global Holdings Ltd., the
failed commodities firm led by former New Jersey Gov. Jon
Corzine.
In a Monday filing with U.S. Bankruptcy Court in Manhattan,
lawyers for Mr. Freeh said he brought "instant credibility" when he
was assigned to serve as the firm's Chapter 11 trustee in November
2011 shortly after the firm collapsed under the weight of Mr.
Corzine's large bets on European debt.
They asked for the $1 million in addition to more than $10
million billed by Mr. Freeh and his legal team from Pepper Hamilton
LLP for their hourly work on the case. Mr. Freeh's hourly rate is
$900.
"At the time of his appointment, it was widely reported that
creditors of the Debtors would not receive any distribution on
their claims," Mr. Freeh's lawyers said. "After 18 months at the
helm, however, the Trustee is proud to report that the Debtors'
creditors ultimately are expected to receive distributions in
excess of $1 billion."
The personal award must be approved by Judge Martin Glenn.
In court papers, Mr. Freeh's lawyers said the Bankruptcy Code
allows him to request nearly $4 million for his work as MF Global's
Chapter 11 trustee, based on how much creditors are recovering in
the case. Chapter 11 trustees are appointed by the bankruptcy court
to take the helm of a debtor company when there's evidence of fraud
or mismanagement.
Bernstein Shur's Robert Keach, a bankruptcy attorney who's been
tasked with monitoring fees in the AMR Corp. (AAMRQ) Chapter 11
case, said Mr. Freeh has made a "billing judgment" to seek about a
quarter of what the Bankruptcy Code allows.
Mr. Keach said Mr. Freeh, who is currently investigating alleged
misconduct in the settlement program BP PLC (BP) set up to
compensate victims of the 2010 Gulf of Mexico oil spill, may have
sought the lower fee to avoid scrutiny.
Lawyers for Mr. Freeh said they would explain their rationale in
a later court filing.
Mr. Freeh was put in charge of MF Global just after its October
2011 collapse, while a separate trustee, James W. Giddens, was
tapped to unwind the firm's brokerage under the authority of the
Securities Investor Protection Act. Mr. Freeh stepped down as
Chapter 11 trustee in June.
As he led MF Global's dismantling, Mr. Freeh helped make key
deals to free up money for creditors and investigated the events
that led to the firm's sudden collapse. He eventually sued Mr.
Corzine, saying the former Goldman Sachs Group Inc. (GS) chairman
used "risky trading strategies" that sapped the company's
liquidity. While the collapse initially exposed a $1.6 billion
shortfall in customer accounts, Mr. Freeh has said those funds
should be fully restored.
Mr. Corzine has denied the claims leveled against him in the
lawsuit, which was turned over to a litigation trust after Mr.
Freeh stepped down as MF Global's Chapter 11 trustee.
Mr. Freeh was also instrumental in negotiating a three-way
settlement with MF Global's U.K. unit and Mr. Giddens, the
brokerage trustee, that serves as the basis of a creditor-payment
plan for MF Global filed by a group of hedge funds.
Under the plan, holders of about $1 billion in MF Global's
unsecured bonds stand to recover between 12 cents and 42 cents on
the dollar for their claims, while creditors with claims stemming
from a $1.2 billion revolving loan would recover between 27 cents
and 80 cents.
Individual customers of MF Global's brokerage, which is still
being managed by Mr. Giddens, have already recovered most of their
funds that were caught up in the firm's collapse.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@wsj.com
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