By Dow Jones Business News, October 31, 2013, 01:13:00 PM EDT
By Joseph Checkler
MF Global Holdings Ltd. is going after $20 million in dividends it paid to private equity firm J.C. Flowers & Co. and
other shareholders in the year leading up to its bankruptcy, which was filed two years ago Thursday.
In a lawsuit filed Wednesday with U.S. Bankruptcy Court in Manhattan, MF Global said it paid $16.1 million in
dividends to J.C. Flowers and $3.9 million to another group of preferred stockholders from November 2010 all the way up
to August 2011, less than three months before the firm collapsed into bankruptcy.
MF Global says that money belongs to its estate, thanks to a provision of the Bankruptcy Code that allows a company to
claw back money it paid out in the year before its bankruptcy filing if its financial condition was perilous.
Along with J.C. Flowers, MF Global named yet-to-be-identified shareholders, John Doe No. 1 through John Doe No. 25, as
recipients of the dividends. A spokesman for J.C. Flowers didn't immediately respond to a request for comment.
J.C. Flowers began investing in MF Global in 2008, including taking a dividend-yielding stake in the company through
MF Global's July 2008 preferred stock offering. The firm collected a total of $39.6 million in dividends, according to a
2011 Wall Street Journal article, but marked to zero the rest of its investment when MF Global collapsed. Now, the
company is going after some of those dividends as part of its effort to regain more money for other creditors.
J.C. Flowers founder J. Christopher Flowers and former MF Global Chairman and Chief Executive Jon S. Corzine were
close friends from their days at Goldman Sachs Group Inc. ( GS ), but the relationship soured after MF Global's collapse,
according to a November 2011Wall Street Journal report.
MF Global collapsed into bankruptcy on Oct. 31, 2011, after Mr. Corzine's big bets on European sovereign debt went
bad. In the aftermath, an estimated shortfall of $1.6 billion was found in brokerage customer accounts.
Since that time, however, a trustee for both the company and its brokerage business has worked to recover money for
creditors, and the shortfall is all but gone.
Individual customers of MF Global 's brokerage, which is being managed by James W. Giddens, have already recovered
most of the funds that were caught up in the firm's collapse. Next week, Mr. Giddens will ask a judge if he can pay out
the rest of the customer money.
For creditors of the brokerage's parent company, a judge approved a proposal earlier this year that would pay holders
of about $1 billion in MF Global's unsecured bonds between 12 cents and 42 cents on the dollar for their claims, with
claims stemming from a $1.2 billion revolving loan recovering between 27% and 80%.
Still, Mr. Corzine, a former Goldman chairman and New Jersey governor, is facing multiple lawsuits over the implosion,
including ones from former customers, the litigation trust representing MF Global and the Commodity Futures Trading
Commission. Mr. Corzine and other accused executives have denied any wrongdoing.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Joseph Checkler at email@example.com
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