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MF Global plan proponents win court OK to establish litigation trust
By Caroline Salls
Pittsburgh, May 2 - The proponents of MF Global Holdings Ltd.'s confirmed plan of liquidation received court approval to modify the plan to allow establishment of a five-year litigation trust, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.
The company said the trust will be established to liquidate litigation trust claims and transfer available cash for the benefit of holders of allowed claims and interests.
In addition to a complaint filed last month by Chapter 11 trustee Louis J. Freeh against Jon S. Corzine, Bradley I. Abelow and Henri J. Steenkamp, MF Global said more claims may arise from the circumstances alleged in that lawsuit or in the trustee's report.
As previously reported, Freeh's lawsuit alleges that the defendants, in their capacities as MF Global officers, "breached their fiduciary duties of care, loyalty and oversight over the company and failed to act in good faith."
As Freeh said in his trustee's report filed in April, the lawsuit alleges that the defendants dramatically changed MF Global's business plan without addressing existing systemic weaknesses that ultimately caused the plan to fail.
As part of the new business plan, and in violation of his fiduciary duties as chief executive officer, the trustee said Corzine engaged in risky trading strategies that strained the company's liquidity and could not be properly monitored by its inadequate controls and procedures.
MF Global Holdings, a New York-based commodity and derivatives broker, filed for bankruptcy on Oct. 31, 2011. Its Chapter 11 case number is 11-15059.
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