* JPMorgan suit includes new claim of fraud
* Suit says fraud led to $25 billion in unpaid loans
By Caroline Humer
NEW YORK, Feb 18 Lehman Brothers and Barclays
deceived JPMorgan Chase & Co (JPM.N) with bad assets that the
failed investment bank's own employees dubbed "goat poo,"
according to new court papers that escalate a legal battle
between the financial firms.
JPMorgan filed new court claims in the case, contending
that Lehman left it with $25 billion in unpaid loans secured by
undesirable assets like those left out of the sale to
Lehman Brothers Holdings Inc LEHMQ.PK filed for bankruptcy
on Sept. 15, 2008 and then quickly sold its prize investment
banking assets to Barclays Bank (BARC.L). JPMorgan had been
The court papers, filed in U.S. Bankruptcy Court in
Manhattan on Thursday, said that Barclays and Lehman called
certain Lehman assets "toxic waste" and "goat poo" and
knowingly excluded them from their sale agreement.
A Lehman spokeswoman declined to make an immediate comment on
the lawsuit. JPMorgan declined comment. A spokesman for Barclays
declined to comment.
Thursday's filing revised a lawsuit that was first filed in
December in response to Lehman's own $8.6 billion suit against
JPMorgan. Lehman's suit, filed last May, accused JPMorgan of
siphoning off collateral ahead of Lehman's bankruptcy filing.
Lehman employees wrote in emails that contrary to Lehman's
and Barclays' portrayal of their deal to bankruptcy court as
including all related assets, Barclays did not have to purchase
certain "toxic waste" securities, JPMorgan contends.
Those securities included certain Lehman commercial paper
known as "RACERS" -- restructured asset certificates with enhanced
Lehman employees also called these assets "goat poo" in
emails, JPMorgan said in the lawsuit.
According to the emails cited by JPMorgan, Lehman employees
also said the balance sheet that the company had sent to
bankruptcy court was wrong because it showed that Barclays was
buying all of Lehman Brothers' positions.
The revised lawsuit added an additional allegation of
fraudulent inducement to lend, saying that when JPMorgan made
Lehman a $70 billion intraday loan on Sept. 18, 2008 -- three days
after the bankruptcy filing -- Lehman knew that JPMorgan would not
be able to recover any claims through the collateral.
The case is in re: Lehman Brothers Holdings Inc v JPMorgan
Chase Bank NA, U.S. Bankruptcy Court, Southern District of New
York, No. 10-ap-03266.
(Additional reporting by Santosh Nadgir in Bangalore)