Monday, March 12, 2012

US Senators Urge MF Global Bankruptcy Trustee Not to Pay Performance-Based Bonuses

In separate letters, Senators John Tester and Amy Klobuchar urged the federal bankruptcy trustee in the MF Global liquidation proceeding not to award performance-related bonuses of several hundred thousand dollars to the brokerage firm’s former top executives. Senator Tester said that it is unacceptable to sanction the award of performance-based compensation before the recovery of client funds. Similarly, Senator Klobuchar asked the trustee to reconsider until a full accounting of the missing funds and the ongoing criminal and civil investigations are complete.

The letters were triggered by a report that the trustee intends to seek bankruptcy court approval for a proposal to pay top executives and employees of MF Global Holdings Ltd. performance-based bonuses of as much as several hundred thousand dollars. According to Senator Tester, the authority of the bankruptcy trustee overseeing the liquidation of MF Global should be used strictly to help maximize MF Global assets so that clients of the firm can see their funds returned and not to retain executives who led the company. This authority strictly prohibits any retention-based compensation awards.

Senator Klobuchar reasoned that, since these same executives were at the helm of MF Global when it collapsed resulting in a $1.6 billion shortfall in customer accounts, issuing bonuses with the company’s holdings would send the wrong message to customers already skeptical of the bankruptcy process.