MF Global Investors Seek Settlement Approval

MF Global Holdings Ltd. investors are seeking final approval of a $74 million settlement stemming from their lawsuit against several financial institutions.

In a Friday filing with U.S. District Court in Manhattan, lawyers for the plaintiffs urged a judge to approve the settlement, calling it "very favorable in light of the risks of continued litigation."

The institutions, including units of Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc., served as underwriters for the sale of MF Global's stocks and bonds before its collapse. The deal, which has already received preliminary approval, "dismisses and releases" all claims against them.

The investors, now led by Virginia Retirement System, sued the financial institutions as part of a larger 2011 suit against former MF Global Chief Executive Jon S. Corzine and other company executives, accusing the parties of not disclosing the risks associated with MF Global's European sovereign debt trades using repurchase-to-maturity transactions.

Mr. Corzine, a former Goldman Sachs chairman and once New Jersey's governor, has denied wrongdoing, as have the other former executives.

Other parts of the suit not including these financial institutions remain alive. Judge Victor Marrero will decide on the settlement at a hearing scheduled for June 26.

MF Global imploded nearly 3 1/2 years ago, as investors fled the firm after its bets on European sovereign debt came to light. The exodus created what was believed to be a $1.6 billion shortfall in customer accounts that should have been segregated from MF Global's money pool.

Funds have been recovered to satisfy the customer claims, but the creditors of both the MF Global Inc. brokerage and its parent won't ever get 100% of their money back.

Unsecured creditors of the MF Global Inc. brokerage have already received nearly $1 billion after their most recent distribution was approved by a bankruptcy judge last month. The customers of the brokerage, which is being unwound by trustee James W. Giddens, have received 100% of their money back.

Even with the customers paid in full, lawsuits against the company's former officials and other employees--as well as the firms who did business with MF Global--remain. Mr. Corzine and the other executives have been tapping two separate insurance policies to pay for their defense costs. Last year, a bankruptcy judge gave them permission to tap most of a $200 million directors and officers insurance policy. Former MF customers have fought their use of a separate policy for errors and omissions, saying some of it belongs to them.

Write to Joseph Checkler at [e-mail]

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