JP Morgan sued for siphoning assets
(27 May 2010 – USA) Lehman Brothers has filed a lawsuit against JP Morgan Chase & Co for allegedly illegally siphoning billions of dollars in assets before the bank collapsed in 2008.
JP Morgan is accused of using their ‘unparalleled access’ as leverage to extract US$8.6 billion (A$12.9 billion) of collateral in the banking giant’s last days, including US$5 billion on the day of the bank’s demise, due to its work as Lehman Brother’s main ‘clearing’ bank.
The complaint indicates that JP Morgan knew that Lehman Brother’s was quickly deteriorating and as a result threatened to deprive the bank of critical clearing services.
To avoid the cut off of the clearing services Lehman Brother’s was told that it would be required to post an excessive amount off collateral.
The complaint states that ‘with this financial gun to Lehman's head, JPMorgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight; those billions of dollars in collateral rightfully belong to the Lehman estate and its creditors.
It is accused that the decision was made by JPMorgan officials, including chief executive Jamie Dimon, after learning from meetings with Federal Reserve chairman, Ben Bernanke, and then-US treasury secretary, Henry Paulson, that the government would not rescue Lehman Brother’s from bankruptcy.
Lehman Brother’s and their official committee of unsecured creditors are seeking for the collateral to be returned and a penalty of US$5 billion in damages.
A spokesperson for JP Morgan, Joe Evangelisti, said that the lawsuit was ‘meritless,’ and said the bank will defend against it.
Any money recovered could increase the payout to creditors. Lehman has also sued Barclays Plc to recover an US$11.2 billion ‘windfall’ from the takeover of US assets.
The complaint indicates that JP Morgan knew that Lehman Brother’s was quickly deteriorating and as a result threatened to deprive the bank of critical clearing services.
To avoid the cut off of the clearing services Lehman Brother’s was told that it would be required to post an excessive amount off collateral.
The complaint states that ‘with this financial gun to Lehman's head, JPMorgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight; those billions of dollars in collateral rightfully belong to the Lehman estate and its creditors.
It is accused that the decision was made by JPMorgan officials, including chief executive Jamie Dimon, after learning from meetings with Federal Reserve chairman, Ben Bernanke, and then-US treasury secretary, Henry Paulson, that the government would not rescue Lehman Brother’s from bankruptcy.
Lehman Brother’s and their official committee of unsecured creditors are seeking for the collateral to be returned and a penalty of US$5 billion in damages.
A spokesperson for JP Morgan, Joe Evangelisti, said that the lawsuit was ‘meritless,’ and said the bank will defend against it.
Any money recovered could increase the payout to creditors. Lehman has also sued Barclays Plc to recover an US$11.2 billion ‘windfall’ from the takeover of US assets.
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