The Resolution Law Group: MF Global to Pay $1.2B to Customers

U.S. District Court Judge Victor Marrero has ordered MF Global to pay customers over $1.2 billion. The defunct brokerage firm left an about $1.6 billion shortfall for approximately 38,000 customers when it filed for bankruptcy protection in 2008.

Now, with this court order, along with the attempts of a liquidation trustee to get back the missing funds, customers are going to get almost all of their money back. Also, in addition to paying certain creditors and customers, MF Global will pay a $100 million penalty.

The brokerage tanked financially after it revealed that it had placed bets worth billions of dollars on high risk European debt. As customers started to leave MF Global in bulk and trading partners demanded bigger margin payments, the firm used customer funds for its own purposes (more than a billion dollars was taken out of their accounts) and did not replace them. This is not allowed. Also the estimated shortfall was about $1.6 billion.

It was the US Commodity Futures Trading Commission that got the federal court consent order against MF Global obligating the latter to pay the restitution. The CFTC filed its complaint against MF Global in June charging the firm and others with unlawfully using the funds of customers. The agency also accused the brokerage of making false statements to cover up the shortfall in filings it submitted to the regulator.

In the consent order, MF Global admits to the allegations related to its liability on the basis of omissions and actions committed by its employees. (Also, a bankruptcy judge has just cleared the firm to repay all the funds it owes to commodity customers both in the US and abroad.)

Just last week, Judge Marrerro rejected Corzine’s attempt to get a shareholder securities lawsuit against him and other MF Global executives dismissed. The plaintiffs are accusing them of misleading investors about the high-risk bets that were made on European debt. In his decision, Marrero commented on how the defendants appeared convinced that none of them did anything wrong. He speculated that maybe instead, “supernatural forces” or “stuff happens” was to blame for the firm’s spectacular “multi-billion dollar” crash. Meantime, the CFTC’s civil case against MF Global Holdings Ltd, ex-CEO John Corzine, and ex-Assistant Treasurer Edith O’ Brien have yet to be resolved.

While it is a positive that customers are finally getting their money back—it doesn’t mean that this makes up for the last two years when they were unable to access their funds. Some folks were shut out of trading while others lost their businesses.

Our securities lawyers at The Resolution Law Group were among those that investigating MF Global claims of customers. We represent institutional and individual investors in getting their losses back.

Advertisements

The Resolution Law Group: Financial Firms in the Headlines: UBS Charges Financial Planning Fees, MF Global Customers Seek to Cap Ex-Leaders’ Legal Defense Expenses, Ex-Thompson REIT CFO is Suspended

UBS Wealth Management Customers Now Paying a Fee for Financial Plans
UBS (UBS) Wealth Management Americas is now charging a fee for the financial plans that advisers are customizing for the firm’s clients. According to the head of the wealth management advisor group head Jason Chandler, this new policy wasn’t implemented to up firm revenues, although it has. Rather, it was set up to increase the level of commitment clients have to their plan, which he say is what happens when they have to pay money for one.

To date this year, the company has made $3 million in financial plan fees, up from $1.4 million from last year. The average fee amount is $4,100. Advisers who design the financial plans are getting 50% of the fee that they charge, while 15% of the fees earned from the plans end up in expense accounts for them.

MF Global Customers Seek to Cap Legal Defense Bills of Brokerage Firm’s Former Executives
MF Global Inc. customers want to limit how much the former top executives of the failed brokerage firm pay for their legal defense. In a court filing, attorneys for the customers expressed concern at how quickly the legal costs of Chief Executive Jon Corzine and other former executives are growing.

The MF Global clients are suing about two dozen former managers for their alleged misconduct that they believe caused the broker-dealer’s collapse. Of the $200 million in insurance coverage that the firm has to cover legal judgments, $30 million has gone toward the ex-executives defense and they are asking for another $10 million. The brokerage customers want a $40 million cap placed on the defense costs. They are worried that the more the ex-MF Global executives spend toward defense the less money there will be to go toward their own $300 million shortfall they are facing and they won’t be made whole for the financial losses they sustained.

Ex-Thompson REIT CFO Gets Five-Month Securities Industry Suspension
The Financial Industry Regulatory Authority is suspending Wendy J. Worcester from the securities industry for five months. Worcester was previously chief financial officer of real estate investor Tony Thompson‘s nontraded real estate investment trust, as well as co-chief compliance officer of TNP Securities LLC, which is the brokerage firm controlled by Thompson. The SRO says that Worcester did not perform independent and sufficient due diligence into Thompson’s real estate dealings, including three Thompson National Properties LLC-sponsored private placement offerings. This caused her to allegedly compromise TNP Securities’ independence.

According to FINRA, When Thompson National Properties was in financial trouble in 2009, suffering nearly $25.8 million in losses and a negative net equity of $13.6 million while launching REIT The TNP Strategic Retail Trust Inc., two Thompson private placement note programs would go on to pay old investors with either new investor funds or money from some other part of the business. Worcester is settling the REIT securities case without denying or admitting to the allegations.

Please do not hesitate to email or call the Securities Fraud at The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group Report: Jon Corzine will not face criminal charges over MF Global

There will be no criminal charges for former New Jersey Governor Jon Corzine over the use of customer funds leading up to collapse of MF Global.

The criminal probe into whether there was wrongdoing on the part of Corzine by the Department of Justice will now be dropped due to lack of evidence, said a report in The New York Post, citing a person with knowledge of the matter.

But the former CEO of Goldman Sachs is not out of the woods.

Corzine is facing civil charges by the Commodities Futures Trading Commission for illegally using customer funds in the last few days of MF Global to help keep the company afloat. The firm’s former assistant treasurer Edith O’Brien is also caught up in the scandal and charged by the CFTC for making the transfers.

Ultimately Corzine was charged by the regulator for failure to segregate and misuse of customer funds and failure to supervise diligently. O’Brien was charged with one count failure to segregate and misuse of customer funds.

To support the allegations, the CFTC used a recorded telephone conversations to support their charges that Corzine was fully aware of the transfers.

Both Corzine and O’Brien have denied any wrongdoing.

The across-the-board automatic federal budget cuts that began in March do not seem to be derailing the recovery so far, given that the job market over all has continued to grow. And certainly some of the scariest predictions about the sequester didn’t come true (partly because Congress stepped in to prevent their occurrence). But if you look closely at the data, the sequester still does seem to be affecting certain industries pretty badly.

Government payrolls have been shrinking for several years. Those declines were mostly driven by state and local layoffs at first; lately, the layoffs have gotten worse at the federal level. In the last four months, the federal government has laid off 40,000 workers. And that number doesn’t indicate the full extent to which the sequester has affected employment, as many government agencies have resorted to furloughs rather than full-blown layoffs.

Below is a chart showing the numbers of federal workers who have been working “part time for economic reasons,” a term meaning they want to be working full time, but can’t get their employer to give them full-time hours. The numbers are not seasonally adjusted, so I’ve charted the trends for 2011, 2012 and 2013 to compare the level in a given month with its level exactly one year and two years earlier.

As you can see, there was a huge jump in the number of reluctant federal part-timers in June compared with the same month in 2011 and 2012. In June 2013, 148,000 federal workers were working part-time hours (defined as fewer than 35 hours a week) but wished they were working full time, compared with 58,000 in June 2012 and 55,000 in June 2011.

In fact, in every month starting in February, when agencies perhaps started preparing for the sequester, the number of reluctant federal part-timers has been higher than its level in 2012. In each of those months in 2013, the level has also been higher than in 2011, with the exception of April, when there were an equal number of federal part-timers for economic reasons in 2011 and 2013 (64,000).

And of course, these figures show only what’s happening with federal workers. There are plenty of private-sector workers whose jobs and hours depend on federal money, too, as I wrote in an article last week.

In that article, I calculated which industries were most reliant on federal defense money, based on Labor Department data showing where the Defense Department spends its money, and how money spent in any one sector affects employment in all the others (for example, employment of metal workers might rise when the government orders a new jet). The top five defense-sensitive industries are ship and boat building, facilities support services, aerospace product and parts manufacturing, scientific research and development services and electronic instruments manufacturing (which includes companies that make navigational instruments, for example).

Here’s a look at the monthly change in employment in these defense-sensitive industries, shown at an annualized percentage growth rate, versus all other industries:

Source: Bureau of Labor Statistics. Numbers are seasonally adjusted, and change is expressed at an annual rate. May is the most recent month for which seasonally adjusted data are available for the smaller defense-sensitive industries. Source: Bureau of Labor Statistics. Numbers are seasonally adjusted, and change is expressed at an annual rate. May is the most recent month for which seasonally adjusted data are available for the smaller defense-sensitive industries.

As you can see, in the last few months, the defense-sensitive industries have been shedding jobs, while the rest of the country’s employers have been adding jobs over all. The trends for the previous months are noisy, but if you smooth them out, it looks as if the defense-sensitive industries and the other industries were both doing about equally well, with the exception of a huge downward spike in employment in the defense-sensitive industries around the time of the summer 2011 debt ceiling crisis.

If you suspect that you are the victim of Bank Fraud, do not hesitate to email or call please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

MF Global Holdings Bankruptcy Trustee Files Lawsuit Against Ex-CEO Corzine and Other Former Executives

According to bankruptcy trustee Louis Freeh, former MF Global Holdings (MFGLQ) CEO Jon Corzine and other former executives did not act in good faith when they were in charge of the company. The ex-FBI director is suing them in bankruptcy court for gross negligence and breach of fiduciary duty. (Corzine is also a former Goldman Sachs (GS) CEO and he previously served as a US Senator and the Governor of New Jersey). Also named as defendants are the firm’s ex-COO Bradley I. Abelow and ex-CFO Henri J. Steenkam. MF Global’s collapse left customers wondering where about $1.6 billion dollars of their funds had gone missing.

Per Freeh’s lawsuit, after becoming CEO, Corzine and the other executives “dramatically changed” MF Global’s business plan but failed to update certain systems, including poor controls that made it impossible for the company to figure out liquidity levels. Corzine then allegedly made the company place large bets on bonds put out by countries in Europe. Freeh believes that the executives knew the risks involved but ignored them.

The case comes after Freeh submitted a report about Corzine and other executives. The former FBI director had said he was going to hold off and try resolving the securities claims via mediation, but even with this process still ongoing, Freeh believes that moving ahead with the lawsuit is in creditors’ best interest.

Meantime, MF Global customers and shareholders are also suing Corzine. Another MF Global bankruptcy trustee, James Giddens, even has joined customers’ securities lawsuit against the executives. He is tasked with getting back the money for clients of MF Global’s MF Global Inc., its brokerage operation. Approximately 89% of the funds have been recovered for US customers. Foreign customers have gotten back 18%.

Despite the losses, no criminal charges have yet to be filed in the MF Global debacle. The Commodity Futures Trading Commission’s investigation into what happened continues.

If you, your family, friends, neighbors or associates have been subjected to Securities Fraud, please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud