Securities Investor Protection Corporation v. MF Global Inc.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK 	NOT FOR PUBLICATION
In re:
MF GLOBAL INC.,
Debtor.
Case No. 11-2790 (MG) SIPA
MEMORANDUM OPINION AND ORDER DENYING MOTION TO COMPEL
DISCOVERY OF THE MF GLOBAL ADJUNCT LETTERS, FROM JAMES W.
GIDDENS, TRUSTEE, REGARDING WIRE TRANSFERS, ADDRESSED IN THOMAS
BAXTER’S CONGRESSIONAL TESTIMONY
A P P E A R A N C E S:
PAUL HAMANN
Pro Se
511 Beverly
Lake Forest, Illinois 60045
HUGHES HUBBARD & REED LLP
Counsel for James W. Giddens, Trustee for the SIPA Liquidation of MF Global Inc.
One Battery Park Plaza
New York, New York 10004
By: 	James B. Kobak, Esq.
Jeffrey S. Margolin, Esq.
Josiah S. Trager, Esq.
Dina R. Hoffer, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Paul Hamann (“Hamann”), pro se, filed a Motion To Compel Discovery of the MF Global
Adjunct Letters, From James W. Giddens, Trustee, Regarding Wire Transfers, Addressed in
Thomas Baxter’s Congressional Testimony (the “Motion”). (ECF Doc. #916.) 	James W.
Giddens, Trustee for the liquidation of MF Global Inc. (“MFGI”), (the “Trustee”), filed an
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opposition to the Motion. (ECF Doc. #948.) For the reasons explained below, the Court denies
the Motion.
BACKGROUND
The background of this case has already been discussed in numerous opinions of this
Court and will not be repeated here. On November 4, 2011, the Court granted the Trustee the
authority to issue subpoenas for the production of documents and the examination of MFGI’s
current and former officers, directors, employees and other related persons to facilitate its
investigation into the alleged shortfall in customer-segregated property. (ECF Doc. #34.) In the
Memorandum Opinion supporting that Order, (ECF Doc. #36), the Court stated that “[t]he
Trustee must be permitted to conduct his investigation without being required to divulge his
investigatory steps or the discovery obtained to any other party-in-interest,” and that “[a]n
investigation as contemplated by [SIPA] cannot be performed effectively if the Trustee is
required to reveal his investigatory methodology or documents or information discovered . . . .”
Memorandum Opinion, at 2.
On February 6, 2012, the Trustee filed his Preliminary Report on Status of His
Investigation and Interim Status Report on Claims Process and Account Transfers (the
“Preliminary Report”). (ECF Doc. #896.) The Trustee made available the Preliminary Report
on his Web site. The Preliminary Report outlined the investigatory conclusions thus far made by
the Trustee and his professionals without compromising the integrity of the ongoing
investigation.
DISCUSSION
In his Motion, Hamann requests discovery related to alleged wire transfers of segregated
customer funds to the New York Federal Reserve Bank, JP Morgan Chase, CitiGroup, and Bank
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of America during August, September, and October 2011, as well as “all relevant documents
relating to the MF Global letters, regarding wire transfers, addressed in Thomas Baxter’s
Congressional Testimony.” Motion, at 2. Hamann apparently “believes that the requested
documents will show that the Chief Council for the Federal Reserve Bank In NEW YORK, had a
reasonable belief that customer segregated funds were being swept from MF Global to the NEW
YORK FEDERAL RESERVE immediately before the MF Global bankruptcy filing.” Id. at 1.
Hamann offers no legal basis for his request.
In denying another party’s request for Rule 2004 discovery in the chapter 11 proceedings
for MF Global Holdings Ltd., this Court stated:
Permitting private-party discovery at this time, either under Rule
2004 or the discovery rules applicable to contested matters, is
unnecessary and would hinder the ongoing investigations. 	Under
15 U.S.C. § 78fff-1(d), “the SIPA Trustee has a duty to investigate
the circumstances surrounding the failure of MFGI and report to
the 	Court 	‘any 	facts 	with 	respect 	to 	fraud, 	misconduct,
mismanagement, and irregularities,’ as well as ‘any causes of
action available to the estate.’” The Court has already granted the
SIPA Trustee the authority to conduct an independent investigation
on 	missing 	customer 	property 	and 	all 	possible 	sources 	for
recovery. 	If 	the 	SIPA 	Trustee 	finds 	improper 	transactions
involving customer property between the Chapter 11 Debtors and
MFGI, the SIPA Trustee can bring a number of causes of action
under the Bankruptcy Code to recover missing funds. 	The SIPA
Trustee 	is 	also 	investigating 	other 	transactions 	and 	conduct,
including potential claims and causes of action against the Chapter
11 Debtors, their principals, and affiliates. Additionally, the Court
directed 	the 	Chapter 	11 	Trustee 	“to 	undertake 	a 	limited
investigation and thereafter report to the Court on the narrow issue
whether the funds on deposit in the [MF Global Finance USA Inc.]
account at [JPMorgan Chase Bank, N.A.], as of the petition date,
included ‘customer property,’ and if so, how much.” 	There may
well be a time when private-party discovery is appropriate, but
now is clearly not that time.
In re MF Global Holdings Ltd., No. 11-15059, 2012 WL 280984, at *5 (Bankr. S.D.N.Y. Feb. 1,
2012) (internal citations omitted).
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CONCLUSION
For the reasons stated in this Court’s February 1, 2012 order in the MF Global Holdings,
Ltd. chapter 11 proceedings, the Motion is DENIED.
Dated: March 7, 2012
New York, New York.
_____/s/Martin Glenn_______
MARTIN GLENN
United States Bankruptcy Judge
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