NEW YORK, Fri May 18, 2012 – The legal team winding down MF Global’s bankruptcy estate, led by former FBI director Louis Freeh, estimates the fees charged by the team and other professionals have reached nearly $25 million since the bankruptcy was filed in October.
Now a customer group is planning to ask that the case be streamlined so that those professionals – especially Freeh – receive less and customers receive more.
On Friday, a coalition of former MF Global customers plans to argue in U.S. Bankruptcy Court in Manhattan that the Chapter 11 liquidation of the MF parent entity should be converted to a so-called Chapter 7, coalition leader James Koutoulas said on Wednesday.
In Chapter 11 cases, businesses or their court-appointed trustees try to restructure debt or sell assets to recover as much money as possible to pay off creditors, a process that can be drawn out. In Chapter 7, a trustee sells off assets as quickly as possible, with less involvement from professionals like lawyers, but sometimes at the expense of drawing top-shelf value.
Under bankruptcy law, administrative fees are paid ahead of other creditor claims, so Freeh’s mounting bills are siphoning money from creditors, said Koutoulas, a Chicago fund manager who had $55 million tied up in MF Global on behalf of his clients.
Freeh has released estimated fee figures but not yet formally submitted compensation requests.