WaMu, JPM, FDIC Brawling

Last week, Washington Mutual and its holding company WMI filed suit against the Federal Deposit Insurance Corp., basically claiming that the FDIC conspired with JP Morgan Chase in a panicked “fire-sale” liquidation of WaMu.  Read the complaint here.

WMI is suing for $13 billion, the amount it feels it would have gotten over the “blue-plate” price of $1.9 billion paid by JPM.  This wouldn’t be the first time the FDIC has looked foolish for cramming through a bad deal.  As LawHawk notes, the government tried to force a sale of Wachovia to Citibank for $2.2 billion, but Wells Fargo was willing to pay $15.1 billion.  WMI claims an orderly liquidation process would have resulted in far greater proceeds than the JPM deal.

The Daily Deal has summarized some interesting conspiracy theories, including the usual tactic of blaming the naked shorts, early and that JPM got more and earlier information than others participating in a sham bidding process.

After the jump, JPM fights back, and we identify the banks’ counsel.

JPM countersued in the US Bankruptcy Court in Delaware (where the WaMu bankruptcy is being handled); the WMI complaint against JPM was filed in DC Dist. Ct.  JPM “sued to ensure that it does not lose any of its interests in Washington Mutual’s banking operations, which it said it bought in good faith. It also wants to be reimbursed for various claims it might face over the purchase.”  A copy of the complaint, which includes the purchase agreement, is here. Careful, though, it’s 250 pages.

Weil Gotshal & Manges is representing WaMu and WMI.  David Berz (George Washington BA ’70, JD ’73), a DC environmental (?!?) lawyer and Adam Strochak (Vermont BA ’87, George Washington JD ’93), a DC bankruptcy, complex-commercial, and environmental litigator signed the complaint as local counsel.  The heavy lifting is more likely being done by the New Yorkers: Marcia Goldstein (Cornell BA ‘73, Cornell JD ‘75), chair of the Business, Finance & Restructuring department, and her bankruptcy colleagues Brian Rosen (Brandeis BA ’80, Suffolk JD ’83) and Michael F. Walsh (Hamilton BA ’72, San Diego JD ’77, NYU LLM ’79).

JP Morgan is using Adam Landis and Matthew McGuire of Landis Rath & Cobb as local Delaware counsel.  Sullivan & Cromwell let five people sign the complaint: New York litigators David Braff (Cleveland State BA ’80, Ohio State JD ’84), who is also managing partner of the firm’s litigation group, Bruce Clark (Holy Cross AB 67, Harvard JD ’70), and Stacey Friedman (UCLA BA ’91, Duke JD ’97), and LA litigators Robert Sacks (Harvard AB ’79, Texas JD ’82) and Hydee Feldstein (Swarthmore BA ’79, Columbia JD ’82).

Stay tuned, this is just getting interesting.

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Tagged as: jp morgan, sullivan & cromwell, wamu, weil gotshal