Bloomberg News

JPMorgan Funds Drop $700 Million Claim Against Bankrupt Lehman

February 02, 2012

Feb. 2 (Bloomberg) -- JPMorgan Chase & Co., conceding arguments it should recoup losses suffered by fund affiliates on investments in Lehman Brothers Holdings Inc., will drop a $700 million claim against the bankrupt firm.

The agreement, filed yesterday in U.S. Bankruptcy Court in Manhattan, ends JPMorgan’s claim that the affiliates lost the money on bonds and other investments with Lehman entities, and have valid claims on the defunct firm.

As part of the agreement, the funds’ claims will be reassigned “free and clear of any adverse claims” brought by Lehman, according to the filing.

“Rather than litigate the issues,” Lehman and the funds “have agreed to settle their dispute,” lawyers for Lehman wrote in the filing. The agreement requires court approval.

JPMorgan, the biggest U.S. bank, is receiving the rights to claims in return and there will be no financial impact on the company, Joseph Evangelisti, a spokesman for the New York-based bank, said in an e-mail.

Kimberly Macleod, a Lehman spokeswoman, declined to comment on the filing.

Lawyers for the funds in December asked the court to overrule Lehman’s objection to the claims and allow the funds to recoup the losses by using some of the $8.6 billion in collateral that Lehman deposited with the bank before it failed.

Lehman argued the funds aren’t affiliates, “merely investment vehicles” for JPMorgan clients who bore the losses, and can’t use the collateral to repay themselves.

Lehman filed the biggest bankruptcy in U.S. history in 2008, listing $613 billion in debt.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance by Linda Sandler in New York. Editors: Michael Hytha, Douglas Wong

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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