Yesterday, Lehman Brothers Holdings Inc. (LBHI) and the Official Committee of Unsecured Creditors of LBHI (the Committee) filed a complaint against JPMorgan Chase Bank, N.A. (JPMorgan) in the U.S. Bankruptcy Court for the Southern District of New York. LBHI and the Committee allege that JPMorgan "leveraged its life and death power as the brokerage firm's primary clearing bank" using its "unparalleled inside knowledge" of details of Lehman's distress to extract $8.6 billion of collateral in the four business days ahead of Lehman's September 15, 2008, bankruptcy, including $5 billion on the final business day.
According to the complaint, JPMorgan acted as an intermediary in Lehman's dealings with other parties. The complaint alleges that JPMorgan was in a position to know that Lehman's viability was rapidly deteriorating, and threatened to deprive Lehman of critical clearing services unless it posted an excessive amount of collateral in order to "leapfrog" over other creditors. "With this financial gun to LBHI's head, JPMorgan was able to extract extraordinarily one-sided agreements from LBHI literally overnight," the complaint said, and that "[t]hose billions of dollars in collateral rightfully belong to the Lehman estate and its creditors."