LONDON Jan 20 JPMorgan is suing
Berlin's public transport provider in a British court to recover
the $204 million plus interest it says it is owed over an
"unfortunate" derivatives contract taken out before the
The lawyer for the U.S. bank said Berliner Verkehrsbetriebe
(BVG) was looking for anyone other than itself to blame for the
losses on the collateralised debt obligation (CDO).
"Rather than simply accepting that it had been unfortunate
in the events that happened in the financial markets... BVG has
decided to follow a course doing everything it could to avoid
paying its debts... casting around for someone to blame other
than itself," Laurence Rabinowitz told a London court on the
first day of the trial.
Problems arose simply because the transaction occurred just
when serious cracks in the world's financial system were
appearing, Rabinowitz added.
BVG, which runs the German capital's underground railway,
tram, bus and ferry networks, argues that it was misled by
JPMorgan and the bank's law firm, Clifford Chance, and that it
did not fully understand the risks involved. BVG is due to begin
its defence on Tuesday.
Clifford Chance said in a statement the "claims against us
are misconceived and entirely without merit."
The transport authority maintains that the employee most
closely involved in the swap had no experience of the complex
financial derivative the bank had pitched to him and
misunderstood it, according to court documents.
CDOs are a series of assets, often high-yield junk bonds,
mortgage-backed securities, credit default swaps and other
products, put together by a bank and sold in tranches according
to their level of risk. They were marketed to investors as
investments with a defined risk and reward.
Following the 2008 financial crisis many investors who lost
tens of millions of dollars through such investments have
questioned what banks knew when they modelled such products and
a number have brought legal action against the banks.
Industry experts have also argued that some organisations
may have lacked the sophistication to understand CDOs.
The case comes after JPMorgan paid nearly $20 billion in
2013 to settle assorted legal claims, including the "London
Whale" derivatives trading scandal.