The last time I wrote about the securities fraud class action
claims against JPMorgan Chase for the losses it suffered in
risky credit default swaps, I told you to pay attention to the
unusually short class period alleged in the early complaints.
The first couple of filings claimed the bank's deception of
investors began on April 13 -- the day JPMorgan CEO Jamie Dimon
told analysts that news reports about the dangerous trading
position of its chief investment office were a "tempest in a
teapot" -- and ended on May 10, when the bank disclosed the
initial $2 billion loss of the "London Whale."
Two institutional investors joined the JPMorgan fray last
week in federal court in Manhattan, and suddenly the class
period has become a point of controversy. A pipefitters' union
trust fund represented by Labaton Sucharow claims that the bank's fraud began not on April 13 but three months earlier, on
Jan 13. That was the date JPMorgan filed an annual report with
the S e curities and Exchange Commission that allegedly failed to
warn investors about the looming CIO losses, "instead offering a
false and misleading picture of stable and consistent
operational strategy and risk exposure."
The Louisiana Municipal Police Employees' Retirement System,
represented by Grant & Eisenhofer, put the beginning of the
alleged fraud long before the 2012 annual report. According to
the LAMPERS complaint, filed Friday, JPMorgan began deceiving
shareholders about its exposure all the way back in February
2010, when it published a misleading description of the CIO in
its annual report. From then on, LAMPERS claims, the bank
ignored so-called red flag warnings and continued to mislead
investors about its risky hedges.
To understand why the funds want to change the initially
asserted class parameters, you have to look at the
certifications at the end of the Pipefitters Local Union 537 and
the LAMPERS complaints, where each of the funds discloses its
JPMorgan holdings. Remember, these are sophisticated securities
class action plaintiffs represented by two of the best firms in
the business, so the alleged class periods are no accident. The
funds and their lawyers know that only plaintiffs who bought or
sold shares within the specified class period can participate in
the case, and the lead plaintiff spot will likely go to the
shareholder with the biggest losses. The Pipefitters'
certification states that beginning on March 2, the union fund
bought more than 45,000 shares of JPMorgan stock, paying more
than $1.5 million. But its last purchase was on April 11, two
days before Dimon's "tempest in a teapot" remark. Under the
shorter class period alleged in the first JPMorgan fraud
complaints, the union fund wouldn't be much of a player.
LAMPERS would have even less chance to be lead plaintiff
than the Pipefitters, under the initial asserted class period.
The fund made its last JPMorgan purchase on April 4, when it
bought 500 shares. The bulk of its JPMorgan buys, however, were
between May and December of 2010, when it acquired more than
20,000 shares. Unless LAMPERS can persuade the judge presiding
over the case -- right now, it's U.S. District Judge George
Daniels -- that the alleged fraud began in 2010, it's likely to
be on the sidelines as this case is litigated.
I left messages with Pipefitters counsel Christopher Kelly
of Labaton, LAMPERS counsel Jay Eisenhofer of G&E and JPMorgan
counsel Daryl Libow of Sullivan & Cromwell. None of them got
back to me.
(Reporting by Alison Frankel)
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