By Jonathan Stempel
NEW YORK, Feb 28 (Reuters) - The former JPMorgan Chase & Co
trader known as the "London Whale" was not responsible
for Lehman Brothers Holdings Inc's bankruptcy and should not be
dragged into an $8.6 billion lawsuit accusing the largest U.S.
bank of causing it, JPMorgan said.
According to a Wednesday filing in Manhattan bankruptcy
court, JPMorgan believes that Lehman's own documentation showed
that the trader, Bruno Iksil, had nothing to do with alleged
mismarked derivative trades that are part of the dispute.
JPMorgan said Lehman and its unsecured creditors committee,
which also seeks Iksil's testimony, pointed to nothing that
shows the bank's Chief Investment Office had any role in
collateral requests at the center of Lehman's lawsuit.
Getting Iksil involved now would waste time and money,
JPMorgan said, particularly in light of statements by former
U.S. Treasury Secretaries Timothy Geithner and Henry Paulson
that the collateral requests did not cause Lehman to fail.
"It is readily apparent that the only real reason for
plaintiffs interest in taking Mr. Iksil's deposition is that he
has been in the news," JPMorgan said.
Andy Rossman, a partner at Quinn Emanuel Urquhart & Sullivan
representing Lehman, in a statement on Thursday said Iksil's
mismarked trades "resulted in improper demands for hundreds of
millions of dollars of collateral. JPMorgan's extraordinary
effort to block that testimony is revealing."
A hearing on Lehman's request is scheduled for March 13.
Iksil gained notoriety after his activities were linked to
$6.2 billion of trading losses at JPMorgan's Chief Investment
Office. The French national had worked in London for the New
York-based bank.
Lehman employed JPMorgan as its main clearing bank, handling
third-party dealings, prior to its Sept. 15, 2008, bankruptcy.
It accuses JPMorgan of hastening its collapse by using what
it learned in that role to extract $8.6 billion of collateral in
the four business days ahead of the Chapter 11 filing.
Citing Iksil's "practice of intentional mismarking," Lehman
said it wanted to review trades that led to an "unjustified"
$273.3 million collateral call on Sept. 9, 2008, which JPMorgan
reversed the next day.
A Sept. 10, 2008 internal JPMorgan email linked Iksil to two
trades by the Chief Investment Office in London that were then
"significantly contributing" to a dispute with Lehman.
In addition, Lehman said it wanted to question Iksil over
how the Chief Investment Office managed JPMorgan's exposure to
what was once Wall Street's fourth-largest investment bank.
According to Lehman, Iksil's lawyers have indicated he will
not cooperate without an official request through international
channels. Lehman has asked U.S. Bankruptcy Judge James Peck in
Manhattan for permission to start that process.
In a Feb. 13 court filing, Lehman said it also wants to
question other people who worked in JPMorgan's Chief Investment
Office around the time of the bankruptcy.
Last April, Peck narrowed but refused to dismiss Lehman's
lawsuit, saying the company could pursue claims that JPMorgan
had acted in a "commercially unreasonable" manner.
Lehman emerged from Chapter 11 last March. It has said it
hopes to repay creditors about $65 billion. That process is
expected to take several years.
The JPMorgan case is Lehman Brothers Holdings Inc et al v.
JPMorgan Chase Bank NA, U.S. Bankruptcy Court, Southern District
of New York, No. 10-ap-03266. The main bankruptcy case is In re:
Lehman Brothers Holdings Inc in the same court, No. 08-13555.
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