J.P. Morgan Chase

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J. P. Morgan Chase & Co. was formed  with the merger of The Chase Manhattan Corporation and J.P. Morgan & Co. Inc., What may have seemed like an indicator of continued prosperity for this industry giant instead brought hard times for the firm. A year after the merger, energy provider Enron declared bankruptcy, and few banks had as many dealings with them as J.P. Morgan Chase. They face numerous lawsuits from their shareholders, those of Enron, and other parties involved in the deals.

Why is J. P. Morgan accused of fraud?

Though Merrill Lynch’s involvement with Enron was publicized more highly than that of other investment firms, the bankrupt energy company is accused of receiving loans from many sources, one of which was J.P. Morgan. This has led to several lawsuits.

One suit has been filed by insurance companies that stood to lose money for insuring transactions between Enron and J.P. Morgan. The insurance companies allege that they should not be liable for deals that J.P. Morgan executives knew to be shams.

J.P. Morgan is also being sued in the Enron shareholder suit that includes as defendants Enron executives, Arthur Andersen LLP, a number of banks, and several law firms. Enron shareholders believe that J.P. Morgan helped Enron take out loans that were disguised as purchases and trades.

At the same time, J.P. Morgan faces lawsuits from its own shareholders, who claim that the company didn’t properly inform them of how much it stood to lose in its dealings with Enron.

Finally, a group of banks that combined to make an enormous loan to Enron in its dying days is considering filing suit against J.P. Morgan. At issue is whether or not J.P. Morgan organized the loan so that it could be repaid for some of its loans to Enron, fully aware that the company would soon declare bankruptcy.

What is the current status?

The lawsuit filed by the ten insurance companies has been settled. The plaintiffs, originally on the hook for about $1 billion to J.P. Morgan, have agreed to pay about 60 percent of it.

J.P. Morgan executives have been questioned about their roles in the fall of Enron, but, to date, no criminal charges have been filed against them.


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