UPDATE 1-JPMorgan says London Whale didn't cause Lehman bankruptcy
* Bruno Iksil played no role in Lehman collapse -JPMorgan
* Lehman suing JPMorgan in $8.6 billion case
By Jonathan Stempel
NEW YORK, Feb 28 (Reuters) - The former JPMorgan Chase & Co trader known as the "London Whale" was not responsible for Lehman Brothers Holdings Inc's bankruptcy and should not be dragged into an $8.6 billion lawsuit accusing the largest U.S. bank of causing it, JPMorgan said.
According to a Wednesday filing in Manhattan bankruptcy court, JPMorgan believes that Lehman's own documentation showed that the trader, Bruno Iksil, had nothing to do with alleged mismarked derivative trades that are part of the dispute.
JPMorgan said Lehman and its unsecured creditors committee, which also seeks Iksil's testimony, pointed to nothing that shows the bank's Chief Investment Office had any role in collateral requests at the center of Lehman's lawsuit.
Getting Iksil involved now would waste time and money, JPMorgan said, particularly in light of statements by former U.S. Treasury Secretaries Timothy Geithner and Henry Paulson that the collateral requests did not cause Lehman to fail.
"It is readily apparent that the only real reason for plaintiffs interest in taking Mr. Iksil's deposition is that he has been in the news," JPMorgan said.
Andy Rossman, a partner at Quinn Emanuel Urquhart & Sullivan representing Lehman, in a statement on Thursday said Iksil's mismarked trades "resulted in improper demands for hundreds of millions of dollars of collateral. JPMorgan's extraordinary effort to block that testimony is revealing."
A hearing on Lehman's request is scheduled for March 13.
Iksil gained notoriety after his activities were linked to $6.2 billion of trading losses at JPMorgan's Chief Investment Office. The French national had worked in London for the New York-based bank.
Lehman employed JPMorgan as its main clearing bank, handling third-party dealings, prior to its Sept. 15, 2008, bankruptcy.
It accuses JPMorgan of hastening its collapse by using what it learned in that role to extract $8.6 billion of collateral in the four business days ahead of the Chapter 11 filing.
Citing Iksil's "practice of intentional mismarking," Lehman said it wanted to review trades that led to an "unjustified" $273.3 million collateral call on Sept. 9, 2008, which JPMorgan reversed the next day.
A Sept. 10, 2008 internal JPMorgan email linked Iksil to two trades by the Chief Investment Office in London that were then "significantly contributing" to a dispute with Lehman.
In addition, Lehman said it wanted to question Iksil over how the Chief Investment Office managed JPMorgan's exposure to what was once Wall Street's fourth-largest investment bank.
According to Lehman, Iksil's lawyers have indicated he will not cooperate without an official request through international channels. Lehman has asked U.S. Bankruptcy Judge James Peck in Manhattan for permission to start that process.
In a Feb. 13 court filing, Lehman said it also wants to question other people who worked in JPMorgan's Chief Investment Office around the time of the bankruptcy.
Last April, Peck narrowed but refused to dismiss Lehman's lawsuit, saying the company could pursue claims that JPMorgan had acted in a "commercially unreasonable" manner.
Lehman emerged from Chapter 11 last March. It has said it hopes to repay creditors about $65 billion. That process is expected to take several years.
The JPMorgan case is Lehman Brothers Holdings Inc et al v. JPMorgan Chase Bank NA, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-03266. The main bankruptcy case is In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555.
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