Tester slams proposed MF Global bonuses, stands up for Montana farmers and ranchers
Senator calls bonus proposal ‘outrageous,’ demands money go to Montanans
(BIG SANDY, Mont.) – With MF Global bankrupt and Montana farmers and ranchers missing millions of dollars, Senator Jon Tester is blasting a proposal to award “performance-related” bonuses of several hundred thousand dollars to the brokerage firm’s former top executives.
MF Global, which traded in commodities markets, lost the assets of hundreds of Montana farmers and ranchers when it declared bankruptcy in October.
Tester calls plans by a bankruptcy trustee to distribute bonuses “outrageous” and demanded MF Global’s trustee reconsider his decision.
“Quite simply, it is unacceptable for you to sanction the award of performance-based compensation before the recovery of client funds,” Tester wrote Louis Freeh, MF Global’s bankruptcy trustee. “Rather than reward executives, I urge you to use these funds to repay the farmers and ranchers whose trust was so betrayed by MF Global.”
Tester also reminded Freeh that bankruptcy law significantly restricts his ability to compensate former firm executives.
“Your authority as the bankruptcy trustee overseeing the liquidation of the MF Global should be used strictly to help maximize MF Global assets so that clients of the firm can see their funds returned,” Tester wrote.
Tester, the Senate’s only active farmer, called for a hearing in the Senate Banking Committee to examine the factors leading to MF Global’s collapse and demanded that the Justice Department conduct a comprehensive investigation.
MF Global’s investments in risky European sovereign debt led to its bankruptcy in November. Bankruptcy officials are working to distribute remaining MF Global funds to former customers and creditors.
Tester’s letter to Louis Freeh is available below and online HERE.
March 9, 2012
Mr. Louis J. Freeh
Freeh Group International Solutions, LLC
1185 Avenue of the Americas, 30th Floor
New York, NY 10036
Dear Mr. Freeh:
I am deeply troubled by reports that in your role as conservator of MF Global, you plan to ask a bankruptcy judge to approve “performance-related” bonus payments reportedly as much as “several hundred thousand dollars each” to former senior executives of MF Global. On behalf of the Montana farmers and ranchers who suffered significant losses following the disappearance of hundreds of millions of dollars held by MF Global Holdings, I believe this request for bonuses is outrageous.
MF Global customers, including many farmers and ranchers in Montana, have lost up to $1.6 billion in funds that MF Global’s leadership was legally obligated to protect. The mere notion that senior officials of a firm that has failed to account for these farmers’ and other clients’ losses should get a performance-based bonus is troubling.
Your authority as the bankruptcy trustee overseeing the liquidation of the MF Global should be used strictly to help maximize MF Global assets so that clients of the firm can see their funds returned not to retain executives who led the company when my constituents’ funds were raided. This authority strictly prohibits any retention-based compensation awards. Given that an estimated $1.6 billion in client losses have yet to be recovered, it is unimaginable that these executives should be awarded performance-based awards. On behalf of the hundreds of former MF Global clients in Montana, I urge you not to recommend any bonus awards for employees who held responsibility when client funds were lost until and unless every penny of customer funds are returned. While I recognize the interest of the trustee in maximizing asset sales and saving money that can ultimately be returned to MF Global clients, large bonuses are not an appropriate way to accomplish this goal. Funds being considered for bonus payments should instead be applied to paying down customer losses.
Quite simply, it is unacceptable for you to sanction the award of performance-based compensation before the recovery of client funds. My constituents have already lost an average of 28 percent of their funds because of the catastrophically bad decisions of a few. Rather than reward executives in the hopes of being able to pay back creditors, I urge you to forgo executive bonuses and instead use these funds to repay the farmers and ranchers whose trust was so betrayed by MF Global. I look forward to your reconsideration of this decision.
CC: Mr. James W. Giddens, Esq., Trustee, MF Global Holdings