News & Observer | newsobserver.com | Lehman creditors inquire into JPMorgan role

Published: Oct 04, 2008 12:30 AM
Modified: Oct 04, 2008 02:05 AM

Lehman creditors inquire into JPMorgan role

 

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NEW YORK - Creditors of Lehman Brothers have asked a judge to allow an investigation into whether JPMorgan Chase & Co. had a role in weakening Lehman as it headed toward bankruptcy.

The creditors committee thinks Lehman Brothers Holding had more than $17 billion in cash and securities held at JPMorgan before its Chapter 11 filing but that JPMorgan froze the assets Sept. 12, three days before Lehman filed for court protection.

"The creditor's committee believes that as a result of JPMC's actions, LBHI suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired," lawyers for creditors wrote in court papers.

"In freezing LBHI's assets, JPMC was purportedly holding all of LBHI's assets as a potential offset against any claims," lawyers said. JPMorgan provided billions in clearing advances -- short-term loans that investment banks use to clear trades on a daily basis -- to Lehman in the days around its Chapter 11 filing.

Lehman disclosed last week that JPMorgan is its biggest creditor, holding secured claims worth an estimated $23 billion.

A spokesman for JPMorgan Chase declined to comment Friday. U.S. Bankruptcy Judge James Peck is scheduled to consider the creditors' request Oct. 16.

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