Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court, Southern District of New York on May 7, 2009, on behalf of all Government Pension Funds that were participants in JPMorgan Chase's securities lending program, through one or more of the collective investment vehicles managed by Defendant, which incurred losses relating to investments in medium-term notes of Sigma Finance, Inc.
The case name is styled The Investment Committee of the Manhattan and Bronx Surface Transit Operating Authority Pension Plan v. JPMorgan Chase Bank, N.A., 09 civ. 4408 (SAS). A copy of the complaint filed in this action is available from the Court, or can be viewed by clicking on the link to the right.
The Complaint alleges that shortly after Defendant purchased a substantial amount of Sigma MTNs using the cash collateral held by Class members, analysts following Sigma and other structured investment vehicles ('SIVs') like Sigma warned that the lack of liquidity in the credit market and sharp declines in the market value of assets backing many MTNs threatened their viability. Despite these warnings, the Defendant kept the class members collateral invested in the Sigma MTNs. Defendant breached its duties to prudently and loyally manage the assets. As described herein, Defendant knew or should have known that the substantial investment in Sigma MTNs was not a proper investment of the Plan's assets: notwithstanding this, Defendant failed to adequately protect the Plan and Class members from the inevitable losses that they knew or should have known would ensue, due to Defendant's imprudent management of the Plan's assets.
The complaint further alleges JPMorgan's involvement with Sigma MTNs was not limited to its investments under its Securities Lending Program on behalf of the Plan and the Class. At the same time JPMorgan was investing Plaintiff and the Class' money in Sigma MTNs, JPMorgan provided Sigma with short-term repo financing which was necessary to Sigma's survival. Sigma's repo funding came with significant terms whereby lenders, such as JPMorgan, were able to demand approximately $2 in collateral for every $1 in financing they provided. Published reports have disclosed that at some point prior to Sigma's collapse, Sigma had to pledge up to $25 billion worth of collateral in exchange for $17 billion in repo funding. Despite the repeated warnings regarding Sigma MTN's and Sigma's survival beginning in 2007, JPMorgan continued the Plan and Class' investment in Sigma MTNs. Simultaneously, JPMorgan earned fees and interest through its repo financing for Sigma. Consequently, JPMorgan's financial interest as Sigma's repo financier was in direct conflict with its fiduciary responsibility to the Plan and the Class members. In October 2008, JPMorgan issued a notice of default for the credit it provided to Sigma and moved to seize the collateral provided in exchange for its repo funding. JPMorgan's move was followed by other lenders. The banks' seizure of Sigma's assets forced Sigma's collapse. Thus, at the same time that JPMorgan sought to safeguard its own financial interest by seizing Sigma's collateral ' precipitating Sigma's collapse ' JPMorgan continued the Plan and Class members' investment in Sigma, which resulted in Class members suffering substantial losses.
Wolf Haldenstein has approximately 70 attorneys in various practice areas and offices in Chicago, New York City, San Diego, and West Palm Beach. The reputation and expertise of this firm in shareholder and other class litigation has been repeatedly recognized by the courts, which have appointed it to major positions in complex securities multi-district and consolidated litigation.
If you wish to discuss this action or have any questions, please contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, Matthew Guiney, Esq. by telephone at (212) 545-4600, or via e-mail at email@example.com.