MF Global U.K. Staff Seek $62 Million in Bonus, Severance
By Kit Chellel - Apr 4, 2012 3:26 AM ET
Employees of MF Global Holdings Ltd (MF).’s U.K. unit are seeking 39 million pounds ($62 million) of unpaid bonuses, severance pay and pension contributions from the collapsed broker’s administrator KPMG LLP.
The service company that employed staff in London has one of the largest claims on a list of creditors published by KPMG on March 14. The 39 million pounds is for the unit to meet its remaining contractual obligations to workers, including guaranteed bonuses and statutory redundancy pay, KPMG administrator Richard Heis said.
Executives including Jon Corzine, the former New Jersey governor and Goldman Sachs executive who led MF Global, don’t know whether they’ll be able to access $375 million in insurance proceeds to defend themselves against 21 lawsuits related to the firm’s collapse. Photographer: Andrew Harrer/Bloomberg
Former employees trying to recover money from KPMG may only get a few pence on each pound they claim, said employment lawyer Jo Keddie of London firm Winckworth Sherwood LLP. Those seeking bonuses or other payouts are being treated as unsecured creditors, and will be paid only after KPMG has returned MF Global (MFGLQ)’s customers all their money.
“Unfortunately the majority of debts owed by MF Global to its former employees are unsecured and, if accepted by the administrators, they will fall very low in the pecking order for payment,” Keddie said.
Louis Freeh, the former Federal Bureau of Investigation director now serving as trustee for MF Global’s U.S. holding company, is considering bonuses for managers who help recover customer cash. That would go against efforts by the Senate Agriculture Committee to stop MF Global executives from getting any bonus payouts. In the U.K., KPMG has promised a retention bonus to employees who stay on to wind down the London unit.
Heis said the funds sought by MF Global U.K. Services Ltd. were an estimate by its directors of how much was owed to staff on the day MF Global collapsed. While the U.K. unit said in February it would begin returning funds to clients, administrators haven’t paid unsecured creditors anything.
KPMG was appointed administrator to return funds to customers of the failed U.K. brokerage when its New York-based parent filed bankruptcy on Oct. 31.
About 300 of MF Global U.K.’s 700 workers who were retained by KPMG to work on the administration were offered bonuses for staying on, Heis said in January, without stating the total value.
Including wages, options, shares and bonuses, MF Global’s U.K. unit paid $232 million to its employees last year, according to documents filed in a public registry. One U.K. director received $7 million.
The parent company’s Chief Operating Officer, Bradley Abelow, General Counsel Laurie Ferber and Chief Financial Officer Henri J. Steenkamp, are in line to receive bonuses this year if a New York bankruptcy court approves them, according to Frank Piantidosi, an adviser to Freeh.
Executives including Jon Corzine, the former New Jersey governor and Goldman Sachs executive who led MF Global, don’t know whether they’ll be able to access $375 million in insurance proceeds to defend themselves against 21 lawsuits related to the firm’s collapse. U.S. Bankruptcy Judge Martin Glenn in Manhattan delayed ruling on the request earlier this week.
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