London Whale Didn't Cause Lehman Bankruptcy, JPMorgan Says

The former JPMorgan Chase trader known as the "London Whale" was not responsible for Lehman Brothers' bankruptcy and should not be dragged into an $8.6 billion lawsuit.

NEW YORK -- 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.

In a Wednesday filing in Manhattan bankruptcy court, JPMorgan said Lehman knew from documents it produced itself that the trader, Bruno Iksil, had nothing to do with allegedly mismarked derivative trades about which Lehman wanted to take his deposition.

JPMorgan also said Lehman and its unsecured creditors committee, which also seeks Iksil's testimony, had pointed to nothing that shows the bank's Chief Investment Office had any role in the collateral requests at the center of Lehman's 3-year-old lawsuit.

Moreover, getting Iksil involved wastes 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.

Lehman spokeswoman Kimberly Macleod said the company's lawyers would review the filing.

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.

JPMorgan was Lehman's main clearing bank, handling third-party dealings. Lehman accuses JPMorgan of hastening the bankruptcy by using what it learned in that capacity to extract $8.6 billion of collateral in the four business days prior to the Sept. 15, 2008, Chapter 11 filing.

Citing Iksil's "practice of intentional mismarking," Lehman said it wanted to review trades that led to a large, "unjustified" collateral call on Sept. 9, 2008.

Lehman also said it wanted to review how the Chief Investment Office managed JPMorgan's exposure to what was once Wall Street's fourth-largest investment bank.

Lehman said Iksil's lawyers have indicated he will not cooperate without an official request, prompting it to ask U.S. Bankruptcy Judge James Peck for permission to start the process.

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.