JPMorgan to pay Lehman $797.5 mln to end litigation over collapse

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By Jonathan Stempel | NEW YORK

NEW YORK JPMorgan Chase & Co will pay
$797.5 million in cash to end all litigation brought on behalf
the former Lehman Brothers Holdings Inc, whose September 2008
collapse triggered a global financial crisis.

The settlement made public on Wednesday requires approval by
U.S. Bankruptcy Judge Shelley Chapman in Manhattan.

It follows JPMorgan’s agreement last January to pay $1.42
billion in cash to resolve most other claims, in what had been
an $8.6 billion lawsuit against the largest U.S. bank to recoup
money for Lehman creditors.

JPMorgan, which had been Lehman’s largest secured creditor,
was accused of exploiting its leverage as Lehman’s main “clearing” bank to siphon critical liquidity in the last few
days before Lehman went bankrupt on Sept. 15, 2008.

Lehman creditors have maintained that JPMorgan unnecessarily
extracted billions of dollars of collateral, and by doing so
obtained a windfall at their expense.

In a court filing, lawyers for Lehman said the settlement
avoids the uncertainty of continued litigation and millions of
dollars of additional legal fees, and is “in the best interests
of the Lehman estate and its creditors.”

No one admitted wrongdoing, the settlement agreement said.

JPMorgan has already set aside money for the accord,
according to a regulatory filing. A hearing to consider approval
is scheduled for Feb. 16.

Once Wall Street’s fourth-largest bank, Lehman reported $639
billion of assets when it filed for Chapter 11 protection,
making its bankruptcy by far the largest in U.S. history.

Lehman emerged from bankruptcy in March 2012, and has since
been winding down.

Creditors have recouped more than $110 billion, and
bondholders once projected to receive just 21 cents on the
dollar have recovered close to twice that sum.

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