[A-List] US legitimation crisis: JP Morgan Chase

["Michael Keaney" <michael.keaney@xxxxxx>]

JP Morgan accuses insurers ahead of trial
By Andrew Hill in New York
Financial Times: December 2 2002

JP Morgan Chase has accused 11 insurers of "brazen distortion of the facts"
about the US bank's involvement in commodities deals with Enron, as it
prepares to go to court to recover nearly $1bn from the companies.

In a much-anticipated civil trial beginning on Monday in New York - the
first anniversary of Enron's bankruptcy - JP Morgan Chase will try to
convince jurors that the insurers should honour guarantees they issued on
oil and gas contracts between an offshore vehicle and the energy group.

The insurers have accused JP Morgan Chase of using the Jersey-based vehicle,
Mahonia, as a conduit for disguised loans to Enron.

The Mahonia affair was at the centre of often bitter exchanges in Congress
earlier this year, when senators grilled JP Morgan Chase about the "pre-pay"
transactions.

JP Morgan Chase said last Friday that the insurers "agreed that their
obligation to pay was 'absolute and unconditional'".

The bank said the insurers "always understood the entirety of our
transactions with Enron and their own obligations. Their assertions to the
contrary are fabrications and we intend to prove it."

A lawyer for the insurers declined to comment ahead of the trial.

The case will be keenly watched because it is the first Enron-related trial
since the US government's prosecution of Andersen, Enron's former auditor,
in Houston earlier this year.

It will also represent the first attempt by any of the parties to explain to
a jury some of the complex derivatives deals that banks arranged for Enron.

The challenge for JP Morgan Chase will be to convince lay people that the
deals it arranged for Enron through Mahonia were a normal part of structured
finance.

Monday's proceedings will start with jury selection, followed by the two
sides' opening arguments.