By Linda Sandler and David McLaughlin – May 26, 2010
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Lehman Brothers Holdings Inc. sued JPMorgan Chase & Co. to recover tens of billions of dollars in “lost value,” accusing the bank of precipitating its downfall and preventing it from winding down in an orderly fashion.
JPMorgan, which was Lehman’s main short-term lender before its September 2008 bankruptcy, helped cause the failure by demanding more collateral as credit markets tightened during the financial crisis, Lehman said in a complaint filed today in U.S. Bankruptcy Court in New York.
The lawsuit follows a report by Lehman examiner Anton Valukas, who said in March that Lehman might have grounds for suing JPMorgan and other banks.
“On the brink of LBHI’s bankruptcy, JPMorgan leveraged its life and death power as the brokerage firm’s primary clearing bank to force LBHI into a series of one-sided agreements and to siphon billions of dollars in critically needed assets,” Lehman said in the complaint.
Lehman didn’t specify in the complaint an amount for the losses it is claiming as a result of JPMorgan’s actions.
“The lawsuit is ill conceived and the costly litigation will cause a further drain on the limited resources available to the Lehman bankruptcy estate,” Joe Evangelisti, a JPMorgan spokesman said.
“As the examiner’s report makes clear, it was the ill- advised decisions of Lehman itself and its principles to take on perilous leverage and to double-down on subprime mortgages and overpriced commercial real estate and not any conduct by JPMorgan that led to Lehman’s demise and the enormous losses to its various constituents,” he said.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).