The United States Bankruptcy Court required additional information from the trustee in the winding down of MF Global, to determine whether the trustee has a conflict of interest. In the case, the bankruptcy trustee has been accused of having a conflict because of prior work done for JPMorgan Chase & Co, which was one of the key lenders to MF Global. However, the trustee's law firm disclosed that it was hired by JPMorgan sometime between 2009 and 2010, and that the related income was less than 1/10 of 1% of the law firm's annual revenue.
In the legal profession, conflicts of interest are not uncommon. However, a bankruptcy trustee should be careful not to engage in conduct constituting conflict of interest with any of the bankruptcy debtors or businesses that file for bankruptcy. A conflict of interest can be a financial interest in any creditor or business of a bankruptcy or even knowing a bankruptcy debtor filing for bankruptcy. It is unethical for a bankruptcy trustee to administer a bankruptcy estate if he has a personal interest in the outcome of the bankruptcy case.
A trustee must be knowledgeable of all applicable laws, including, but not limited to, 11 USC § 701(a)(1), § 101(14), and § 101(31), and must decline any appointment in which the trustee has a conflict of interest or lacks disinterestedness. A trustee should a procedure to screen new cases for possible conflicts of interest or lack of disinterestedness when he or she is appointment.
If a trustee discovers a conflict of interest or a lack of disinterestedness after accepting the appointment, the trustee should immediately file a notice of resignation in the case. Generally, conflict waivers by either the debtor or creditor are not effective to prevent the trustee's duty to resign.
