WASHINGTON, January 18, 2012 - While the investigation of MF Global’s collapse continues to raise questions of ethical conduct, fiscal propriety and liability, a group of Montana farmers are seeking answers at the courthouse.
Montana cattleman Martin Klinker, Rocking K Land and Cattle, Inc. and farmers Tim Johnson and Wade Jacobsen filed suit against former MF Global CEO Jon Corzine, the firm’s primary lender, JP Morgan Chase, and MF Global’s auditors, PricewaterhouseCoopers LLP. Filed on behalf of thousands of former commodity customers of MF Global, the class action suit alleges that the failed financial firm stole millions from the farmers’ segregated accounts to pay off its debts, particularly those millions in bets made on European sovereign debt.
“It's the cattlemen, the ranchers and the grain producers who relied upon MF Global to conduct their operations to be able to put food on their families' tables,” said attorney Matthew Edling at a Missoula, Mont., press conference. “And for consumers this is going to hit home eventually. You're going to get higher prices in the grocery stores because of these actions.”
During the last days of the firm, Corzine reportedly focused on selling assets before he discovered that the MF Global FCM had an approximately $900 million shortage in client funds. Investigators estimate that $1.2 billion in customer funds could be missing to date. At the time of its collapse, the MF Global brokerage had 38,000 commodity customers.
“Transfers of customer funds for the benefit of MF Global constitute very serious obligations of our rules,” testified CME Group Executive Chairman Terrence Duffy in the Senate Agriculture Committee’s MF Global hearing. “Somebody went in, violated the rule of CME and transferred customer money into the broker-dealer account. I was told there was $950 million moved from segregated customer accounts to the broker-dealer.”
The Montanans filed the suit on Monday, Jan. 9, three days before the trustee for the liquidation of MF Global, James Giddens, met with more than 250 customers in New York. During that Thursday meeting, he told former MF Global customers that the likelihood of being able to find and return the complete sum of their funds is low.
The trustee has been able to return 72% of clients’ money in “bulk distributions” totaling approximately $3.8 billion.
However, he indicated that additional bulk distributions may not be possible. Giddens said some $1.2 billion went missing out of customer accounts with the brokerage’s bankruptcy on Oct. 31, 2011. The trustee's team said more than $700 million of customer funds may be held at MF Global’s UK subsidiary.
Original story printed in January 18, 2012 Agri-Pulse Newsletter.
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