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WaMu seeks to investigate JPMorgan conduct in deal
Fri May 1, 2009 8:34 pm

NEW YORK (Reuters) - Washington Mutual Inc (WAMUQ.PK) on Friday asked a U.S. bankruptcy court to let it probe whether JPMorgan Chase & Co (JPM.N) had unlawfully damaged its former thrift unit's assets in order to buy it "on the cheap," at $ 1.9 billion, last September.

WaMu, the bankrupt holding company of what was Washington Mutual Bank, filed a motion in U.S. bankruptcy court in Delaware, charging that JPMorgan engaged in "sham negotiations" designed to get confidential information out of WaMu and gain an unfair advantage in buying its assets.

The request cited a federal lawsuit brought by WaMu stakeholders against JPMorgan in Texas in February. The suit claims that in the summer of 2008 JPMorgan leaked false and harmful information from WaMu's financial records, in an attempt to deflate its value and purchase WaMu's assets at a fire-sale price.

A JPMorgan spokeswoman said the firm does not comment on pending litigation.

WaMu's collapse was the largest U.S. bank failure in history. The bank was seized by U.S. regulators on September 25 and its deposits immediately sold to JPMorgan.

The surviving holding company filed for bankruptcy protection in Delaware a day later, with $ 32.9 billion in assets, including several corporate entities, real estate assets and an insurance business.

WaMu said in court documents that if the claims in the Texas suit turn out to be true, JPMorgan could be held responsible for the "destruction" of the parent company and the "total losses suffered by its creditors and shareholders."

WaMu said it wanted to investigate whether the sale could be classified as a fraudulent transfer, so that WaMu's creditors could get their money back, or whether it could sue JPMorgan for other claims like unfair competition, breach of contract, and misappropriation of confidential information.

WaMu, once the largest U.S. savings and loan, claimed in court documents that JPMorgan had "long coveted" the bank's depositor base.

The request was the second legal action taken by WaMu against JPMorgan this week.

WaMu sued JPMorgan on Tuesday seeking the return of more than $ 4 billion in cash deposits, it lost access to when its bank was sold last year. In that suit WaMu said that JPMorgan wrongfully claims it acquired the deposits as part of the takeover transaction, but that they should have been treated like any other deposit at the bank.

Also last month, WaMu sued the FDIC for more than $ 13 billion, arguing that JPMorgan paid too little for its bank business and that more money should be available for creditors.

A hearing on WaMu's request to investigate JPMorgan is set for May 20, according to court documents.

(Reporting by Emily Chasan; Additional reporting by Elinor Comlay; Editing by Richard Chang)



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