Bloomberg News

Lehman Creditors Drop Legal Action Against Geithner

June 18, 2012

Lehman Brothers Holdings Inc.’s creditors dropped a legal action against U.S. Treasury Secretary Timothy Geithner after he agreed to answer questions in writing about the defunct investment bank’s failure.

Lehman’s committee of creditors asked a judge in February to force Geithner to give a deposition in Lehman’s lawsuit against JPMorgan Chase & Co. (JPM:US), which alleged the bank siphoned $8.6 billion out of Lehman during the 2008 credit crisis, helping to cause its collapse. A U.S. district judge in Washington closed the case today after creditors agreed to end their action, according to a federal court filing.

Geithner was president of the Federal Reserve Bank of New York when Lehman collapsed. He held discussions in the week before the bankruptcy filing with Richard Fuld and James Dimon, Lehman’s and JPMorgan’s chief executive officers, on the collateral that JPMorgan was demanding for its loans, according to creditors’ court filings. He also met with Dimon and Henry Paulson, then U.S. Treasury Secretary, to discuss “concerns” that Dimon was using the crisis to strengthen JPMorgan at Lehman’s expense, creditors said.

Treasury Refusal

The Treasury wouldn’t let Geithner answer creditors’ questions in person, saying he had spoken publicly about the firm’s collapse “on multiple occasions before Congress and other government bodies,” and would supplement previous help provided to Lehman by responding in writing.

Geithner responded in writing to questions by the creditors and New York-based JPMorgan on April 30. Creditors have no more questions for him, they said in a court filing.

Joseph Evangelisti, a JPMorgan spokesman, declined to comment on the bank’s questions to Geithner.

JPMorgan, the biggest U.S. bank, has returned $699 million to Lehman, which still demands the rest of the $8.6 billion. Along with the lawsuit, they are fighting over $6.3 billion in claims that the bank filed against the defunct firm.

JPMorgan, which lent $70 billion to Lehman’s brokerage around the time of the 2008 bankruptcy, sued Lehman back after the $8.6 billion suit, alleging the company defrauded its lender into making the loan.

Lehman filed the biggest bankruptcy in U.S. history in 2008, listing $613 billion in debt. It is selling assets to pay creditors after officially exiting bankruptcy court this year.

The main case is In re Lehman Brothers Holdings Inc., 08- 13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The Geithner action is Official Committee of Unsecured Creditors of Lehman v. Geithner, 12-mc-00098, U.S. District Court, District of Columbia (Washington). The JPMorgan lawsuit is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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