MF Global’s Bankruptcy Nears a Happy Conclusion

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When Mahesh Desai checked his MF Global account 15 months ago, his $580,000 nest egg was gone.

Like thousands of investors and farmers who had their savings with MF Global, Mr. Desai lost his money in the brokerage firm's chaotic final days. Regulators discovered that $1.6 billion was trapped in a web of improper wire transfers, a stunning breach that sent federal investigators scrambling to build a case.

On Thursday, a bankruptcy court will review a proposal that would return 93 percent of the missing money to customers like Mr. Desai. And the trustee who has submitted the proposal, James W. Giddens, has quietly identified a way that, if sent to the judge and approved, could plug the remaining shortfall for customers in the United States, according to people involved in the case.

The broad push to make MF Global customers nearly whole, a goal now surprisingly within reach, is a remarkable turnaround from the firm's 2011 bankruptcy filing when such a recovery seemed impossible.

"I'm surprised that, magically, the money has shown up," said Mr. Desai, a software account executive who, like most customers in the United States, has only 80 percent of his money. "I feel very relieved."

Customers are not the only ones exhaling. The hearing on Thursday presents a turning point for several major players in the MF Global case, including the firm's trustees, creditors and former executives.

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For one, Mr. Giddens late last year made peace with an overseas administrator tending to the firm's British unit and Louis J. Freeh, the MF Global trustee recovering money for creditors. The pact ended a bitter fight over access to limited resources.

And Jon S. Corzine, the former New Jersey governor who headed MF Global when it collapsed, can now claim some small degree of vindication. The European bonds at the center of a $6.3 billion bet by Mr. Corzine fully paid out when they matured in recent months.

The large position in European sovereign debt in 2011 unnerved MF Global's investors and ratings agencies. Yet it is now clear that the bonds, which were sold to George Soros and other investors, were not by themselves to blame for felling MF Global. The firm also struggled after a one-time charge depressed its earnings.

Mr. Corzine, a former chief of Goldman Sachs, has started to regain his footing. He spent the summer on Long Island, traveled to France around the holidays and visited Central America for a humanitarian project involving children, setting up what he hopes will become a broader charitable effort. Mr. Corzine, 66, also spends time with his grandchildren and has office space in Midtown Manhattan, where he writes and trades with his own money.

In the most telling indication that Mr. Corzine is taking steps to put MF Global behind him, he was close to cooperating with Richard Ben Cramer, an author and a Pulitzer Prize-winning reporter, on a biography. Mr. Corzine's lawyers were in the final stages of negotiating with Mr. Cramer this month when the author died from complications of lung cancer.

Despite Mr. Corzine's progress, he still must shake a nagging federal investigation. While investigators have long doubted their ability to file criminal charges against him, suspecting that chaos and lax controls were at play, rather than outright fraud, they continue stitching together evidence on the firm's demise.

Federal authorities interviewed the former chief over two days in September, according to people close to the case, a sign that the government saw him more as a witness than a suspect. When prosecutors have damning evidence, they often file charges rather than offer a voluntary interview.

But Mr. Corzine, unsurprisingly, has yet to receive assurances that he is in the clear. And investigators continue to examine one of his statements from the September session, the people close to the case said. The statement involved Mr. Corzine's recollection about a phone call he had with JPMorgan Chase, which received a suspicious $175 million transfer from MF Global on its last day of business. A spokesman for Mr. Corzine declined to comment on the case.

JPMorgan sought written promises that the money did not belong to customers, but never received such assurances. An e-mail reviewed by The New York Times shows that Edith O'Brien, an MF Global employee who oversaw the transfer, told Mr. Corzine that the money belonged to the firm, not clients.

Ms. O'Brien declined to cooperate with the investigation without receiving immunity from criminal prosecution. But the government is hesitating to grant her request, according to the people close to the case, fearing that doing so would set a bad example for future investigations.

Other MF Global employees, including several who stayed to help unwind the firm, are moving on. Henri Steenkamp, MF Global's chief financial officer, recently departed. And Bradley Abelow, the firm's chief operating officer, who worked for Mr. Corzine at Goldman Sachs and the New Jersey governor's mansion, left late last year. Weeks earlier, he bought a $1 million condominium in the Williamsburg neighborhood of Brooklyn, according to property records.

With Mr. Abelow gone, Laurie Ferber, the firm's general counsel, remains the highest-ranking executive on Mr. Freeh's payroll.

For Mr. Freeh, the most significant breakthrough came in late December when he joined a deal with Mr. Giddens and the British administrator.

Under the terms of the broad settlement, the administrator will pay an estimated $500 million to $600 million to Mr. Giddens, ending a dispute over customer money trapped overseas. The deal also prompted Mr. Freeh to drop more than $2 billion in claims against Mr. Giddens, who hailed the pact as a "critical milestone."

"This is the eighth-largest bankruptcy in history and we've been able to sprint ahead on some occasions, but this is a marathon," Mr. Giddens's spokesman, Kent Jarrell, said in a statement.

The deal, if approved by the bankruptcy judge on Thursday, will enable Mr. Giddens to return up to 93 percent of the money of MF Global's United States customers. If a series of settlements withJPMorgan and other firms fall into place, people involved in the case said, Mr. Giddens could ultimately return 100 percent of the missing money.

To plug the gap, he must also pursue a small pot of money sitting in MF Global's general estate, a move that would require court approval. Even if he takes that path, foreign clients will still face significant shortfalls.

For some creditors, the race to recover their millions has moved too slowly. Some have grumbled about the roughly $42 million in fees for Mr. Freeh and other lawyers, focusing on parking bills and first-class air travel.

A group of hedge funds and other companies that held MF Global bonds at the time of the bankruptcy recently introduced a plan to liquidate the firm's remains and accelerate the payout process. The group, led by Silver Point Capital, said it expected customers to recover 100 percent of their money.

But not every customer will cash in. Some, in desperation, sold their claims last year at 89 or 91 percent to hedge funds and banks. Mr. Desai held out. "My hope has always been 100 percent," he said.

Mr. Desai credits the turnaround to Mr. Giddens and James L. Koutoulas, a Chicago hedge fund manager who became a voice for thousands of customers whose money disappeared.=While Mr. Koutoulas continues to fight, it has come with collateral damage. After he appeared on CNBC in 2011 to criticize JPMorgan Chase over its role in the bankruptcy, the bank closed his account and froze his credit card. The bank declined to comment.