April 28, 2009 / 2:55 PM / 9 years ago

UPDATE 1-WaMu sues JPMorgan for return of $4 bln deposits

NEW YORK, April 28 (Reuters) - Washington Mutual Inc WAMUQ.PK has filed a lawsuit against JPMorgan Chase & Co (JPM.N) seeking the return of more than $4 billion in cash deposits which it lost access to when its bank was sold last year.

Washington Mutual Bank was closed by the U.S. government in September, in the largest bank failure in U.S. history. Its banking assets were sold the same day to JPMorgan for $1.9 billion, and the parent holding company filed for bankruptcy protection a day later.

In a lawsuit filed late Monday in U.S. bankruptcy court in Delaware, WaMu said that JPMorgan has “wrongfully withheld” more than $4 billion in cash that the parent company had on deposit at Washington Mutual Bank at the time of the acquisition.

WaMu said in the lawsuit that JPMorgan improperly claims it acquired the deposits as part of the takeover transaction, when they should have been treated like any other deposit at the bank.

    “The cornerstone of the agreement by which JPMC acquired the assets was that all Bank depositors would have immediate and ready access to their cash on deposit,” WaMu said in the lawsuit.

    WaMu said it needs access to that cash to come up with its Chapter 11 plan, and that by withholding the deposits, JPMorgan could be earning as much as $200 million per year in interest on those deposits.

    A JPMorgan Chase spokeswoman in Chicago declined to comment on the lawsuit, saying “we do not comment on ongoing litigation.”

    The lawsuit was filed as an adversary proceeding to WaMu’s main bankruptcy case. The bankruptcy case is In re: Washington Mutual, Inc. U.S. Bankruptcy Court, District of Delaware, No. 08-12229. (Reporting by Emily Chasan, additional reporting by Elinor Comlay, editing by Matthew Lewis)

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