World Business

Lehman sues J.P. Morgan over money siphoning

(Xinhua)
Updated: 2010-05-27 14:24

Employees carry their belongings out of the headquarters of the investment bank Lehman Brothers in New York, the United States, Sept. 14, 2008. [Xinhua]

BEIJING: Lehman Brothers Holdings Inc filed a lawsuit against J.P. Morgan Chase & Co in Manhattan bankruptcy court, accusing Morgan of illegally siphoning billions of dollars from Lehman and leading up to its record bankruptcy, according to media reports Thursday.

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The lawsuit alleged that J.P. Morgan Chief Executive James Dimon and other top executives used inside knowledge to take advantage of Lehman as its financial state worsened. It alleged that they squeezed billions of dollars out of Lehman by demanding more collateral to cover its risks.

"With this financial gun to Lehman's head, J.P. Morgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight," the complaint said. "Those billions of dollars in collateral rightfully belong to the Lehman estate and its creditors."

J.P. Morgan spokesman Joe Evangelisti said the lawsuit "is ill-conceived and meritless, and we will vigorously defend it."

A bankruptcy-court examiner said Lehman could have a legal claim to claw back $6.9 billion of the $8.6 billion pledged to J.P. Morgan.

In March, a bankruptcy judge approved an accord providing for J.P. Morgan to return several billion dollars of assets to Lehman's estate, but giving Lehman a right to sue further.

Lehman, the fourth largest US investment bank, filed for bankruptcy on Sept 15, 2008, which triggered a financial crisis that spread around the world and resulted in more than $1.6 trillion in losses and write downs by financial institutions.