(Reuters) - A committee of Lehman Brothers creditors is seeking to force U.S. Treasury Secretary Timothy Geithner to testify in connection with an $8.6 billion dispute between Lehman and JPMorgan Chase & Co, Lehman’s banker before its collapse.
Geithner should comply with an August 2011 subpoena to testify about JPMorgan’s demands for $8.6 billion in collateral from Lehman before the company went under, Lehman’s unsecured creditors’ committee said in a filing in federal court in Washington.
Geithner was president of the Federal Reserve Bank of New York in September 2008, the month Lehman filed for bankruptcy. At the time, JPMorgan demanded $8.6 billion in collateral, purportedly as a guarantee against potential losses.
The creditors’ committee said Geithner may have “unique” knowledge about those demands but he has refused to comply with the subpoena.
A spokesman for the Treasury said Geithner has already given public testimony about Lehman’s failure and has “cooperated extensively” in the dispute over the collateral.
“Treasury and the Fed have provided thousands of pages of documents and arranged for depositions of numerous other witnesses,” spokesman Anthony Coley said. “Given all the available information, it is unclear why the plaintiffs continue to insist on unnecessary depositions.”
The collateral has become the focal point of litigation as Lehman tries to recover some or all of the money for the benefit of its creditors. It is working with its creditors’ committee on that front.
Its lawsuit against JPMorgan, filed in 2010, accuses the bank of hastening Lehman’s collapse by using “unparalleled access” to its finances to extract the collateral.
In the days leading up to Lehman’s September 15, 2008, bankruptcy filing, Geithner, in his role at the New York Fed, made more than 35 phone calls to then-Lehman Chief Executive Richard Fuld and at least 10 calls to JPMorgan chief Jamie Dimon, according to the creditors’ committee.
Some of those calls centered on the collateral demands, and Geithner should be required to reveal what those calls entailed, the panel said in the filing.
JPMorgan has filed a counter-lawsuit in the matter, saying Lehman left it with $25 billion in unpaid loans secured by undesirable assets Lehman traders referred to as “goat poo.”
Lehman’s restructuring plan, approved by a bankruptcy court in December, figures to pay creditors roughly $65 billion. The company hopes to officially emerge from bankruptcy and begin paying back creditors in the coming weeks.
The motion to compel Geithner’s testimony is Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc v. Timothy F. Geithner, U.S. District Court, District of Columbia, case number unavailable.
Lehman’s case against JPMorgan is Lehman Brothers Holdings Inc et al v. JPMorgan Chase, U.S. Bankruptcy Court for the Southern District of New York, Adversary Proceeding No. 10-03266.
Lehman’s bankruptcy is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
Reporting By Nick Brown; editing by John Wallace