Lehman, dead, but still filing lawsuits.
JPM is being sued for stealing $230 million and 'filing false and inflated claims' in a $2.6 billion derivatives battle with Lehman. It was a mad scramble for cash and collateral in Lehman's final week, and Jamie Dimon's team grabbed everything they could find while Fuld and company were busy admiring their recently awarded, ridiculously enormous pay packages. But that's another story.
Lehmans bankruptcy estate is suing J.P. Morgan over the bank's more than $2.6 billion in derivatives claims. Lehman, joined by its creditors, is asking a bankruptcy judge to slash J.P. Morgan's claims related to terminated swaps and other deals Lehman struck with JPM and Bear Stearns.
Lehman's lawyers said Friday that J.P. Morgan "inflated" its claims by, among other techniques, choosing the wrong valuation dates and adding charges for losses the bank didn't suffer.
Lehman also claims J.P. Morgan understated the amounts that the bank and Bear Stearns owed the failed investment bank after netting out their trades.
Lehman is also asking U.S. Bankruptcy Judge James Peck of Manhattan to force J.P. Morgan to return more than $230 million it says the bank illegally grabbed as so-called setoffs of amounts owed under derivatives transactions.
In addition to trading with Lehman, J.P. Morgan served as Lehman's clearing bank, providing cash advances of up to $100 billion a day to Lehman to facilitate overnight repurchase, or repo, agreements, a major element supporting the so-called shadow banking system. It held the collateral that Lehman pledged to secure the loans in the triparty repurchase agreements.
That role has resulted in J.P. Morgan being one of Lehman's key adversaries in numerous disputes surrounding the investment bank's demise as well as one of the largest creditors of the bankrupt holding company and its subsidiaries.
Lehman Brothers sued J.P. Morgan in 2010 for $8.6 billion, claiming the bank's demand for more collateral triggered a liquidity squeeze that contributed to Lehman's failure. J.P. Morgan later countersued, arguing its traders actually benefited Lehman's creditors by avoiding a fire sale of the bank's assets in the days following Lehman's collapse.
Judge Peck trimmed some of Lehman's claims in that case, which is pending.
Earlier this year, the estate made its initial distribution to creditors, paying out $22.5 billion, more than double its original estimate. It plans to make a second distribution Oct. 1.
New Bankruptcy Documents Reveal Outsize Pay at Lehman Before Collapse
Robert Millard, the head of Lehman’s proprietary trading operations — the group that traded the bank’s own money — was in line to make $51.3 million in 2007, making him the highest-paid employee on a list of the top-50 paid employees that year. The list shows that he was paid $44.5 million in 2006 and $3.8 million in 2005. Mr. Millard now runs Realm Partners, a hedge fund in New York.
The $51.3 million paid to Mr. Millard approximates the pay package received by Mr. Fuld that year, which, depending on how it was calculated, was worth $40 million to $51.6 million.
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