Lehman sues JPMorgan over 'siphons'
By Jonathan Stempel |
May 28, 2010, Friday
|
Print Edition
Print Edition
LEHMAN Brothers Holdings is suing JPMorgan Chase accusing the second-largest United States bank of illegally siphoning off billions of dollars of assets in the days leading up to its record bankruptcy.
The lawsuit filed in Manhattan Bankruptcy Court on Wednesday accused JPMorgan of using its "unparalleled access" to inside details of Lehman's distress to extract US$8.6 billion of collateral in the four business days ahead of Lehman's September 15, 2008, bankruptcy, including US$5 billion on the final business day.
JPMorgan was Lehman's main clearing bank, acting as a go-between in dealings with other parties.
According to the complaint, JPMorgan knew from this relationship that Lehman's viability was fast weakening, and threatened to deprive Lehman of critical services unless it posted huge collateral.
"With this financial gun to Lehman's head, JPMorgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight," the complaint said.
Lehman said JPMorgan officials learned from meetings with Federal Reserve Chairman Ben Bernanke and then-US Treasury Secretary Henry Paulson that Washington would not rescue Lehman.
Lehman and creditors are seeking US$5 billion in damages, a return of the collateral and other remedies.
JPMorgan spokesman Joe Evangelisti called the suit "merit less" and said the bank would fight it.
The lawsuit filed in Manhattan Bankruptcy Court on Wednesday accused JPMorgan of using its "unparalleled access" to inside details of Lehman's distress to extract US$8.6 billion of collateral in the four business days ahead of Lehman's September 15, 2008, bankruptcy, including US$5 billion on the final business day.
JPMorgan was Lehman's main clearing bank, acting as a go-between in dealings with other parties.
According to the complaint, JPMorgan knew from this relationship that Lehman's viability was fast weakening, and threatened to deprive Lehman of critical services unless it posted huge collateral.
"With this financial gun to Lehman's head, JPMorgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight," the complaint said.
Lehman said JPMorgan officials learned from meetings with Federal Reserve Chairman Ben Bernanke and then-US Treasury Secretary Henry Paulson that Washington would not rescue Lehman.
Lehman and creditors are seeking US$5 billion in damages, a return of the collateral and other remedies.
JPMorgan spokesman Joe Evangelisti called the suit "merit less" and said the bank would fight it.
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