The trustee liquidating MF Global's broker-dealer said he maybring civil lawsuits against some of the company's employees inconnection with a massive shortfall in customer funds created inthe days leading up to its collapse.

Trustee James Giddens said in a statement on Thursday he mayassert claims for breach of fiduciary duty and for violating rulesgoverning the segregation of client funds. Giddens referenced“individuals at” MF Global's parent company and its broker-dealer,but did not name potential targets.

Giddens' spokesman, Kent Jarrell, said the individuals includeofficers, directors and other employees, but declined to saywhether former Chief Executive Jon Corzine was among them.

Corzine left the company in November, days after MF Global wentbankrupt amid investor fears about its exposure to risky Europeandebt. According to a February report from Giddens, MF Globalimproperly used client funds to cover corporate transactions as thecompany sank, creating an estimated $1.6 billion shortfall incustomer accounts.

Corzine's defense attorney did not immediately respond to arequest for comment.

Corzine in December told a Congressional panel he did not intendto break laws and did not know what happened to customers'money.

Other key officers, including Chief Financial Officer HenriSteenkamp and General Counsel Laurie Ferber, told a Congressionalpanel last month they also did not know what caused the shortfall.Assistant Treasurer Edith O'Brien was scheduled to testify butinvoked her Fifth Amendment right against self-incrimination.

O'Brien became central to regulators' ongoing investigation intothe collapse after Congressional investigators released an emailfrom her that said a $175 million transfer made last October 28,and which may have included customer funds, was “Per JC's directinstructions.”

O'Brien's attorney, Evan Barr, declined to comment on Giddens'statement.

A spokesman for Gary Naftalis, Abelow's attorney, declined tocomment. Lawyers for Steenkamp and Ferber did not immediatelyreturn calls seeking comment.

Giddens said in the statement he is “committed” to negotiatingcooperative resolutions with the individuals where possible.

Jarrell said the trustee's legal team has already begunnegotiations with some individuals and “is hoping to interviewothers.”

CIVIL CLAIMS

Corzine and other current and former executives are alreadyfacing more than 20 civil class action lawsuits from customers overMF Global's demise.

Giddens is seeking to require customers to release certainclaims against third parties and assign those claims to Giddens.The move would come as a precondition for customers to receivetheir share of a planned $685 million payout for which Giddens isseeking court approval.

At a hearing in U.S. Bankruptcy Court in Manhattan on Thursday,Judge Martin Glenn held off on approving the payout, voicingskepticism about the requirement to release and assign claims.Glenn said he was concerned the class actions pending against theMF Global executives would be dismissed if claims werereassigned.

Giddens' lead attorney, James Kobak, said at the hearing thatthe release applies only to claims related to money already repaidto customers, and would serve to streamline the recoveryprocess.

Chris Larosa, an attorney for the Securities Investor ProtectionCorp, the insurance fund for customers of failed brokers, saidcustomers should not be able to recover money for themselves which,if recovered instead by Giddens, would be shared among allcustomers.

But Glenn pressed Kobak on the legal authority for the releaseand assignment, which Kobak acknowledged does not explicitly existfor commodities claims as it does for securities claims.

“There's nothing that says you can do it, but nothing that saysyou can't,” Kobak said.

Giddens is hoping to pay $600 million to customers who traded onU.S. exchanges, $50 million to those who traded on foreignexchanges, and $35 million to certain customers who hold physicalproperty, like gold bars.

Commodities customers who traded on U.S. exchanges have alreadyreceived about 72 percent, or $3.9 billion, of the value of theiraccounts through previous distributions by Giddens. The latestproposed payout would raise recovery to about 80 percent.

But “I'm only going to approve this if there's a legal basis,”Glenn said.

CRITICISM FROM THE PARENT

Glenn was more decisive in brushing aside criticism of Giddens'payout plan from other parties, namely Louis Freeh, the trustee forMF Global's parent company.

Freeh had said the plan evidenced neglect of claims from MFGlobal affiliates in favor of those of public customers. He alsodemanded an explanation of how Giddens reached his $1.6 billionshortfall estimate when CME Group Inc has ballparked the gap at notbeing higher than $600 million.

Glenn said transparency was important, but said Giddens shouldnot be expected to provide updates on his investigation prior tohis next interim report, due June 4.

Freeh is responsible for recovering assets belonging to MFGlobal's parent company and its creditors, while Giddens is taskedwith recovering funds for customers.

The bankruptcy is In re MF Global Holdings Ltd, U.S. BankruptcyCourt, Southern District of New York, No. 11-15059.

The brokerage liquidation is In re MF Global Inc, U.S.Bankruptcy Court, Southern District of New York, No. 11-2790.