Washington Mutual Inc’s lawyers, Quinn Emanuel Urquhart Oliver & Hedges, filed a bombshell of a motion in Delaware Bankruptcy court on December 14, 2009. The 700 plus page motion seeks to expand the production requests under Rule 2004 Discovery that initially began on August 26, 2009 and ended on September 25, 2009 (based on a June 24, 2009 court order). Apparently the past discovery turned up enough evidence to require further production requests from “Knowledgeable Parties”, primarily; Quinn wants documentation and communication with respect to WaMu from regulatory entities, rating agencies, former WaMu Suitors, banks and other professionals.
In reading the motion, one gets the sense that the evidence on hand, in the form of emails and presentations, leads Quinn’s investigative team to widen its investigation to obtain evidence that further supports its claim that JPMC acted with misconduct prior to the OTS closure of WMB. The alleged misconduct still centers around “…(a) entering into false negotiations with WMI under the guise of a good-faith bidder in 2008; (b) gaining access to WMI’s and subsidiaries’ confidential and proprietary information pursuant to the confidentiality agreement with WMI; and (c) disclosing confidential information, in violation of the Confidentiality Agreement, to government regulators, rating agencies, media, and investor in an effort to harm WMI by driving down WMI’s credit rating and stock price, and (d) misusing confidential information as part of a lobbying effort to convince federal regulators to seize and sell off Washington Mutual’s assets as a fire-sale price that JMPC would strategically position to take advantage of…”
In my previous article, “JPM’s Ballet among the Carcasses”, I point out the amazing luck JPM had [to be] strategically ready to take advantage of the Bear Stearns failure, to benefit from the Lehman Brothers deal with Barclays and be ready with one-time, non-negotiated conforming bid for the fire-sale of WMB. I imply in that article that the nepotistic relationships between the large banks and the regulators permits and may even foster unprofessional relationships, a ‘un-termed’ form of insider trading. When one considers all the financial turmoil between March and September of 2008, JP Morgan accomplished the impossible - benefitting repeatedly and handsomely from the financial crisis. Three major financial institutions failed, two of which should have had a ripple effect to the very core of JP Morgan – yet JPM came out smelling like a rose, packaging and removing billions in bad debt/collateral and gaining nearly $550 billion in assets - prompting record percentage gains for the second and third quarter of 09 and with the purchase of WaMu, JPM gained a solid footprint into the West Coast banking system.
It’s good to see that my articles, which would normally fall under the “conspiracy theory” category have been given a shard of truth and although I can’t prove my theories, it appears that Quinn is well on its way to matching dates, emails and presentations to suspicious market activity, that Quinn will piece together the puzzle that has been puzzling us for so long – “how did a well capitalized company worth untold billions in going concern value, end up in the hands of its suitor for 1.888 Billion?”But what now? Do we want the guilty parties to receive a slap on the wrist and an order to pay going concern value and punitive damages? Individuals, families, institutions and cities/municipalities were basically ruined by the greed and unfair competition, tortuous interference, interference with prospective economic advantage, breach of contract, misappropriation of confidential information that JPM and the FDIC may have (yet to be proven) perpetrated. And why, why did they do it? I for one want to see jail time for those involved and I’m not talking of a few low level management scapegoats – I want the senior heads to roll (Bair and Dimon), in “blind fury”, I repeat “Off with their heads!”