JP Morgan to Pay $1.42 Billion to End Most Lehman Claims

JPMorgan has agreed to settle most of the claims pending from their lawsuit suit with Lehman Brothers Holdings Inc. for $1.42 billion. Among other claims, the bank was accused of making wrongful transactions just before Lehman’s bankruptcy.

Lehman’s creditors stated in a motion approving the settlement that it would resolve a “significant portion” of the $8.6 billion suit, which accused JPMorgan of contributing to Lehman’s downfall in 2008.

Forty-three of the 49 claims from the lawsuit were dismissed, but the judge allowed a claim that JPMorgan made collateral transfers while Lehman was insolvent to proceed.

In its lawsuit, Lehman alleged that in the final days before bankruptcy, JPMorgan utilized its “life or death” leverage as Lehman’s primary clearing bank to extract liquidity the firm needed – including over $5 billion in cash on the day before Lehman’s collapse – as collateral to secure credit lines held by the firm’s brokerage arm, Lehman Brothers Inc.

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