Career Advice Mar 09 2012

MF Global Employees Fight for Back Pay While Execs Get Bonuses

By julie steinberg

Former MF Global employees suing for $25 million in back pay and other compensation plan to fight efforts to dismiss their case, lawyers for the plaintiffs said. Meanwhile, a trustee for the bankrupt commodities and securities firm is preparing to pay three top executives several hundred thousand dollars in bonuses, according to The Wall Street Journal.

Lawyers for employees who lost their jobs following MF Global's bankruptcy filed a class-action suit in November, claiming the firm didn't give them required notice of layoffs under federal and New York state law. Federal law requires employers to give employees 60 days notice, while New York's Worker Adjustment and Retraining Notification act requires 90 days notice.

Attorneys for MF Global's two trustees filed motions in the U.S. Bankruptcy Court in Manhattan earlier this week to dismiss the employees' suit. The dismissal motions contend trustees for the bankrupt MF Global aren't employers, but "liquidating fiduciaries" and thus not subject to the state WARN and federal laws.

Jack Raisner, an employment lawyer at New York-based law firm Outten & Golden LLP and the lead counsel on the case representing the plaintiffs, said he and other lawyers plan to file oppositions to the dismissal motions in the next month.

The trustees "are saying 'we weren't an employer, we were something else,' as if they transformed from a caterpillar employer to a butterfly liquidating fiduciary that was allowed to fly away," Raisner said.

"We've seen this defense raised a lot," said Charles Ercole, another lawyer for the plaintiffs who's based at Philadelphia law firm Klehr Harrison Harvey Branzburg LLP. "To me it's just part of the process. We're confident the liquidating fiduciary defense will not hold up." More than 100 former MF Global employees have signed on to the suit.

James W. Giddens, the trustee appointed to unwind the brokerage Oct. 31, fired 1,066 employees on Nov. 11. He "was operating under court-authorized authority to wind MF Global down and preserve assets for eventual distribution to former customers," said Kent Jarrell, a spokesperson for the Trustee's office. "The court ordered that MF Global be liquidated and it ceased to be a business."

A spokesperson for Louis Freeh, the trustee unwinding the parent company, declined to comment.

Freeh, a former Federal Bureau of Investigation director, is expected to ask a bankruptcy-court judge as soon as this month to approve performance-related payouts for the chief operating officer, finance chief and general counsel at MF Global, people familiar with the matter told The Wall Street Journal.

All three executives kept their jobs after the company's Oct. 31 failure in order to help Freeh untangle the firm's assets and maximize payouts to creditors.

Under the expected pay plan, the three executives and as many as 20 other MF Global employees working for Freeh would get the bonuses only if they hit specified targets such as increasing the value of MF Global's estate for creditors.

Aaron Lucchetti and Mike Spector contributed to this article.

Write to Julie Steinberg at julie.steinberg@dowjones.com




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