The D.C. Circuit Court of Appeal has revived a securities fraud lawsuit filed by bondholders of the now failed Washington Mutual Bank against JP Morgan Chase & Co. (JPM.N). The plaintiffs had accused the investment bank of causing them to suffer financial losses because it purchased the thrift’s assets at a “fire sale” price.
Per the securities complaint, insurers American National Insurance Co., Farm Family Life Insurance Co., American National Property and Casualty Insurance Co., National Western Life Insurance Co., and Farm Family Casualty Insurance Co. are accusing JP Morgan of exerting pressure on the U.S. Federal Deposit Insurance Corp. so it would force the $1.9 billion sale of Washington Mutual. They contend that as a result, what used to be the biggest savings and loan in the country with $307 billion in assets was “drastically undervalued,” which allowed the financial firm to pick out the best assets at the expense of the plaintiffs, whose bond investments lost their value.
The appeals court panel’s decision reverses a federal district judge’s ruling last year dismissing the complaint. The judge had said that the bondholders need to have pursued all administrative revenues before filing their securities fraud lawsuit, which is one of a number of complaints stemming from the FDIC’s seizure of WaMu in 2008. WaMu’s holding company immediately filed for bankruptcy and is still waiting for a judge to grant the permission required to allow it to give creditors $7 billion.
The appeals court’s decision came just one day after the WaMu bankruptcy reorganization plan was challenged by Aurelius Capital Management. The hedge fund said that WaMu was denied access to approximately $4 billion that JP Morgan was improperly holding. Aurelius claims that as a result, this settlement is currently of greater value to JP Morgan than WaMu.
Related Web Resources:
Aurelius withdraws support of WaMu bankruptcy plan, Bloomberg Businessweek/AP, June 23, 2011
Court revives WaMu bondholder suit vs JPMorgan, Reuters, June 24, 2011
More Blog Posts:
JP Morgan Chase Agrees to Pay $861M to Lehman Brothers Trustee, Stockbroker Fraud Blog, June 28, 2011
National Credit Union Administration Board Files $800M Mortgage-Backed Securities Fraud Lawsuits Against JP Morgan Securities, RBS Securities, and Other Financial Institutions, Institutional Investor Securities, June 23, 2011
Securities Practices of JPMorgan Chase & Goldman Sachs Under Investigation by Federal Investigators, Institutional Investor Securities Blog, May 19, 2011
Contact our securities fraud lawyers to find out whether you have grounds for an institutional investment fraud case.