On Tuesday, a resolution opposing bonuses for MF Global executives passed unanimously in the Senate.
According to news reports, Louis Freeh, the trustee overseeing the bankruptcy of MF Global Holding Ltd, may submit a plan in the coming weeks asking a bankruptcy judge to pay bonuses to top MF Global executives -- even though the company is now bankrupt and thousands of its customers’ money is still missing. MF Global’s bankruptcy last year, the eighth largest in U.S. history, resulted in a loss of as much as $1.6 billion for the firm’s customers. Thousands of farmers, ranchers and small business owners are still owed tens or hundreds of thousands of dollars.
“It’s absolutely outrageous to suggest that bonuses should be paid to the same people who were in charge when the company went bankrupt and lost its customers’ money,” said Michigan Sen. Debbie Stabenow, chairwoman of the Senate Agriculture Committee. “This was a terrible failure of leadership. The people in charge should be held accountable, not rewarded with bonuses.”
“This is not your ordinary Chapter 11 bankruptcy,” said Kansas Sen. Pat Roberts, ranking member. “The process to return customer funds to their rightful owners will take years. This unprecedented loss of segregated customer funds may well have occurred at the direction of MF Global officials. Any recovered funds should go to customers instead of winding up in the hands of those who mismanaged the funds in the first place.”
On March 15, Chairwoman Stabenow and Ranking Member Roberts sent a bipartisan letter (see here) with all of their colleagues on the Agriculture Committee to Freeh urging him to drop any proposal to award bonuses to top executives. Freeh responded on March 16 and declined to commit to the Committee’s request. Last December,the Agriculture Committee convened a hearing to investigate the collapse of MF Global, where top executives testified and indicated that they didn’t know where customer money had gone (see more here). Two of those very executives are among those who may receive bonuses.
The Stabenow-Roberts resolution reads:
Whereas on October 31, 2011, MF Global Holdings, Ltd., filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York after reporting that as much as $900,000,000 in customer money had gone missing;
Whereas MF Global Holdings, Ltd. is the parent company of MF Global, Inc., formerly a futures commission merchant and broker-dealer for thousands of commodities and securities customers;
Whereas following the bankruptcy filing, Judge Louis Freeh, the court-appointed trustee for the liquidation of MF Global Holdings, retained certain employees of the MF Global entities at the time of the bankruptcy, including the chief operating officer, the chief financial officer, the general counsel, and other individuals, in order to assist the liquidation process;
Whereas on March 8, 2012, the Wall Street Journal reported that Mr. Freeh may ask the bankruptcy court judge to approve performance-related bonuses for the chief operating officer, chief financial officer, the general counsel, and the other employees;
Whereas according to the court-appointed trustee for the liquidation of MF Global, Inc. under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), Mr. James Giddens, the total amount of customer funds still missing could be as much as $1,600,000,000;
Whereas on March 15, 2012, all of the members of the Committee on Agriculture, Nutrition, and Forestry of the Senate sent a letter to Mr. Freeh urging him not to reward senior executives of the bankrupt MF Global entities with performance-related bonuses while customer money is still missing;
Whereas on March 16, 2012, Mr. Freeh responded to the members of the Committee on Agriculture, Nutrition, and Forestry of the Senate, stating that he has not made any decisions regarding the payment of bonuses to former senior executives of the firm;
Whereas the Commodity Futures Trading Commission, the court-appointed trustee for the liquidation of MF Global, Inc. under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), and other Federal authorities are investigating the events leading up to the bankruptcy in an effort to return customer money and prosecute any wrongdoing; and
Whereas as of the date of agreement to this resolution, none of the investigators have stated public conclusions regarding the exact location of the missing money or whether criminal wrongdoing was involved: Now, therefore, be it
Resolved, That it is the sense of the Senate that bonuses should not be paid to the executives and employees who were responsible for the day-to-day management and operations of MF Global until its customers’ segregated account funds are repaid in full and investigations by Federal authorities have revealed both the cause of, and parties responsible for, the loss of millions of dollars of customer money.