MF Global Holdings Ltd. is the latest company to fail which is now awarding its top management team bonuses. Unlike the mutli-million follar bonuses for senior management at the too big to fail banks, the MF Global bonuses have only been a paltry few hundred thousand dollars. That has not prevented outrage from both parties in the Senate who have attacked the bonuses to management of the former $40 billion company (in terms of assets).

MF Global did not receive any Government bailout money. However it was the 8th largest bankruptcy in US history. Additionally the company is missing $1.6 billion of customer funds, which has gotten the attention of the Federal Bureau of Investigations (FBI) for a possible fraud case. Finally, the issue has become political since the former CEO, Jon Corzine, was a former head of Goldman Sachs, and a very strong supporter of President Barrack Obama. There was a very strong belief that Jon Corzine would even be the next secretary of the Treasury, although this now looks highly unlikely.

We have obtained the letters, which senators’  Amy Klobuchar (D., Minn.) and Jon Tester (D., Mont.) have written to Louis Free, the MF Global bankruptcy trustee. The letters are posted below and as can be seen, the Senators do not seem to be too happy with the bonuses being paid out:

Dear Mr. Freeh:
On March 9, 2012, it was reported that you intend 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. At a time when farmers, ranchers and other investors in my state have recovered only 72 cents on every dollar they held in segregated accounts with the firm, I find this action unacceptable.

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 sends the wrong message to customers already skeptical of the bankruptcy process. Until a full accounting of the missing funds and the ongoing criminal and civil investigations are complete, I respectfully ask that you reconsider this proposal.


Amy Klobuchar

United States Senator


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.


Jon Tester

CC: Mr. James W. Giddens, Esq., Trustee, MF Global Holdings