MF Global customers can’t demand priority payments, judge says

Posted Jan. 20, 2012, at 9:18 p.m.

NEW YORK — MF Global Inc. brokerage customers, who alleged that the firm’s parent company misappropriated their assets, can’t stake claims to the parent’s assets before the issue is resolved in court, a judge said Thursday.

U.S. Bankruptcy Judge Martin Glenn accused Sapere Wealth Management of “trying to do an end run” around questions of payment priorities. Sapere argued that commodity customers should be paid in full before creditors of the parent get any money. Different regulators have different theories, Glenn said.

“I’m not going to rule on this today,” he said at a court hearing in Manhattan.

The brokerage trustee is returning 72 percent of customers’ assets, saying at least $1.2 billion is missing from their accounts. Brokerage customers are demanding more, while creditors of the parent company, who have yet to receive any money, are trying to improve their potential payout.

The parent, MF Global Holdings Ltd., once run by former New Jersey governor Jon Corzine, filed the eighth-largest U.S. bankruptcy on Oct. 31 after getting margin calls and bank demands for money. The brokerage and the parent are in different bankruptcy proceedings handled by two trustees.

GE lending unit said to be target of probe

LOS ANGELES — Federal authorities are investigating possible fraud at General Electric Co.’s former subprime mortgage arm amid increased public pressure to hold Wall Street accountable for its role in the financial crisis.

The FBI and Justice Department are looking into potentially criminal business practices at WMC Mortgage Corp. in Burbank, Calif., during the home-loan boom, according to four people with knowledge of the investigation. They declined to be identified because of the sensitivity of the investigation.

The government is asking whether WMC used falsified paperwork, overstated income and other tactics to push through questionable loans, two of the people said. They said the probe appears to be focusing on whether senior managers condoned improper practices that enabled fraudulent loans to be sold to investors.

“It’s mostly about: Did they knowingly sell mortgages into the secondary market that they knew were fraudulent?” said one person with direct knowledge of the investigation.

A spokesman for the FBI declined to comment, and the Justice Department did not return telephone calls.

Novartis drug investigated after 11 deaths

LONDON — A European agency is investigating a multiple sclerosis drug made by industry giant Novartis to determine whether the medicine played any role in the deaths at least 11 patients.

The drug, Gilenya, was licensed last year in the European Union to treat a severe type of multiple sclerosis. It can cause a slow heart rate when first taken and doctors closely monitor patients after the first dose.

The European Medicines Agency, which is now investigating the drug, said it isn’t clear if it caused the deaths. One of the fatalities occurred in the United States, where a patient died within 24 hours of taking the first dose.

The European agency said it didn’t know where the other 10 deaths occurred, but that they were reported to its drug database, which monitors side effects from medicines in the European Union.

Novartis said not all the deaths were heart related.

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