March 9, 2012 at 11:28 AM ET
Executives at MF Global wouldn't appear to be model candidates for bonuses. But if the former FBI official acting as the firm's bankruptcy trustee has his way, nearly two dozen high-ranking executives at the disgraced brokerage could rake in hundreds of thousands of dollars — each — as the government tries to sort through the company's chaotic, free-spending final days.
Regulators have been trying to figure out what happened to as much as $1.6 million in customer funds since the company's implosion in October following a string of bad bets on European debts. The Wall Street Journal, citing unnamed sources, said trustee Louis Freeh plans to ask the judge overseeing the liquidation to approve bonuses for MF Global top brass including its COO, CFO and general counsel. Former Goldman Sachs chief and New Jersey governor Jon Corzine resigned as CEO in November without taking a severance package.
These executives would earn bonuses for hitting certain benchmarks in terms of squeezing additional value out of the collapsed company's assets. An advisor to Freeh told the Journal it would be cheaper to keep these workers on board than to hire outside consultants and accountants to sift through reams of sloppy or incomplete paperwork to track down missing funds.
Lawyers and consultants representing the interests of clients — some of who have received less than three-quarters of their invested funds back, according to the Journal — blasted the proposal, calling it a conflict of interest. They argued that customers, whose funds were supposed to be wholly separate from the troubled company's other assets, should be made whole before the other creditors — the ones who would benefit if the bonus benchmarks are met — get their slice of the pie.
This practice of executives at bankrupt companies receiving huge payouts when stockholders, retirees and even current employees lose out is controversial; some experts say performance targets are set so low as to be meaningless and others say the bonuses incentivize executives to put the interests of increasingly activist creditors ahead of equity stakeholders.