By: Ramona Ortega
The tragedy that is MF Global seems to get worse by the minute. Just last week, the failed commodities broker fired 1,066 workers, sparking three class-action lawsuits under the Warn Act, a federal law requiring 60-days’ notice before mass layoffs. If plaintiffs prevail, the bankrupt company could be liable for wages employees would have earned during the period. The lawsuits fall among many claims stacking up in the bankruptcy court. This week, Bank of Montreal’s Harris Bank was served with a subpoena by the SEC as the enforcement unit attempts to recover $600 million in missing funds. MF Global is suspected of dipping into customer accounts to cover the companies losses from bets made on European sovereign debt.
MF Global’s Chapter 11 filing on October 31, marks the eighth largest bankruptcy in history and many are asking company run by former New Jersey Governor Jon S. Corzine, a past executive officer at Goldman Sachs, could have hit rock bottom so quickly, but answers are not likely to surface anytime soon. Corzine and other top officials have already been named in two class-action suits on behalf of shareholders for false and misleading statements.
Despite discussions of selling off lucrative Asia-Pacific assets and possibly receiving debtor-in-possession financing to reorganize, many industry people believe MF Global will skip reorganization and head straight into liquidation. A creditors committee was set up without counsel, signaling that the company might not have enough funds in the estate to pay administrative fees.
In an act to save face for the industry, CME Clearing, an exchange company, offered $300 million, to the bankruptcy trustee, in order to help liquidate customer accounts. As of this morning, CME has lifted its hold on customer accounts but some accounts are still being held up in the bankruptcy court. Those lucky enough to get their money have won a free pass to go; the others will have to hope that there is money left in the pot when they get to the front of the line.