JPMorgan Chase & Co. (JPM:US) faulted a plan by the trustee liquidating Peregrine Financial Group Inc. to request customer documents directly from Chief Executive Officer James Dimon, saying it was “inefficient and unnecessary.”
Trustee Ira Bodenstein asked a judge for authority to subpoena JPMorgan and nine other financial institutions for customer documents as part of what he called a routine examination of the defunct futures brokerage’s records, serving papers directly on their CEOs. JPMorgan told the judge it had instead authorized its lawyers to accept the trustee’s requests on behalf of Dimon.
“Although styled as a ‘routine’ motion under this court’s local rules, certain of the proposed terms and conditions upon which the trustee seeks to conduct the proposed examinations are anything but ‘routine,’” the bank said in a filing in U.S. Bankruptcy Court in Chicago today.
The trustee told the judge last month he needs access to customer documents to identify “abnormalities” in the company’s records. The U.S. Commodity Futures Trading Commission has accused Peregrine founder Russell Wasendorf Sr. of misappropriating more than $200 million of customer funds.
Subpoenas will also go to Citigroup Inc. (C:US), U.S. Bank, Bank of New York Mellon Corp. (BK:US), First Premier Bank, Commerzbank AG, Royal Bank of Scotland Plc, Jefferies Bache LLC, Morgan Stanley (MS:US) and Goldman Sachs Group Inc. (GS:US), the trustee said. All maintained account applications, authorization forms, agreements, statements, wire transfers, canceled checks, deposit slips and correspondence, he said.
Bodenstein’s proposal to bar the banks from recovering the costs of providing the documents also is a departure from the norm, JPMorgan said.
It is “an exceptional and impermissible departure from the federal rules and the debtor’s own contractual undertakings,” it said.
Peregrine’s July 10 bankruptcy, cutting off customers’ access to their accounts, came less than a year after the failure of MF Global Holdings Ltd. (MFGLQ:US), whose clients are still missing money. In district court in Chicago, a receiver is finding and securing Wasendorf’s assets on request of the CFTC, which is probing the missing customer money, as is the Justice Department.
Wasendorf may have funded his personal investments with Peregrine brokerage money, the receiver has said.
In its bankruptcy petition, Cedar Falls, Iowa-based Peregrine listed more than $500 million in assets and more than $100 million in liabilities.
The criminal case is U.S. v. Wasendorf, 12-mj-131, U.S. District Court, Northern District of Iowa (Cedar Rapids). The bankruptcy case is Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The regulatory case is U.S. Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-05383, U.S. District Court, Northern District of Illinois (Chicago).
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