Why Does JP Morgan Want This Fraud Suit Sealed?

JP Morgan is being sued by Ambac for allegedly selling the insurance company hundreds of millions of mortgage back securities while knowingly packing them full of loans they knew were bad. The loans stem from MBS created by Bear Stearns that JP Morgan took control of after they bought the failed bank in 2008. While this might sound like an ailing mortgage insurer trying to pass off blame for buying a financial product that didn’t work out, if we could look inside the lawsuit we’d likely see otherwise.

The problem is the bank, who’s known to have close ties to Obama’s administration, has somehow convinced a judge in the Southern District of New York to seal the complaint. Combing through the legal documents filed before the seal was ordered, we get a glimpse of what has JP Morgan so worried – although because the lawsuit is sealed we still don’t get to see how Ambac can claim these violations of securities laws were started.

Ambac accuses JP Morgan (NYSE:JPM) and the Proposed Individual Defendants of:
(i) “accounting fraud”
(ii) implementing a “bad faith” strategy to reject without justification insurers’ and investors’ demands for the repurchase of breaching loans
(iii) “arbitrarily” denying demands by investors and insurers to repurchase loans
(iv) “manipulating” its accounting reserves
(v) “obscene compensation” and “reckless pursuit of fees”
(vi) “encourag[ing]” the acquisition of defective loans

Talk about accusing them with the kitchen sink of bank fraud. Now here is what I find a weak excuse for why the investors in a publicly traded company (or anyone else who’s interested) shouldn’t be allowed to see this complaint. JP Morgan’s argument is because Abmac was able to get sworn testimony, about how they broke the law, from people working inside the mortgage security packaging division; that this information should be considered a trade secret. On top of that, JP Morgan argues that because ex-employees of these alleged financial criminals are testifying exactly who at the bank told them to skirt the law, this information must be suppressed because it might damage top JPM executives’ reputations.

Sound fishy? This week I went on financial TV journalist Max Keiser’s show to tell his international audience just what JP Morgan was up to. It drew hundreds of comments packed with fans of The Keiser Report screaming this shows just how connected JP Morgan is to a Federal government known to play favorites with American’s bulge banks.

Yet what’s going on behind the scenes is even more alarming. Abmac was able to add testimony to its complaint after I broke news at TheAtlantic.com about Bear Stearns falsifying some of the mortgage details they supplied the raters. You know — to get a better rating so firms like Ambac would buy and insure their mortgage securities. One of the ex-Bear employees quoted in my story, Matt Van Leeuwen, then offered to tell Ambac’s lawyers even more about the misconduct and fraud he witnessed. These Ambac lawyers were also able to see unpublished taped interviews in Nick Verbitsky’s upcoming documentary film ‘The Confidence Game’, which added more clues to who and how Bear Stearns was building RMBS with loans they knew were already in default. But eight days before Van Leeuwen was schedualed to appear in depositions he’d been lawyer’ed up by JP Morgan; claiming because he received a severance when he left the bank they had to represent him. Then according to Van Leeuwen’s deposition transcript, he testified that he’d embellished what he told the documentary film maker in a hour long interview and that some of the information he gave me for my The Atlantic story was taken out of context or only offered on background.

Wow talk about a bait and switch. Of course Verbitsky and I had interviewed other co-workers of Van Leeuwen who corroborated most of his original testimony. So to see him try and swear under oath that he made it up was not only shocking but a clear sign of how influential JP Morgan can be when someone wants to whistleblow. As for Van Leeuwen, he’s suddenly found the funds to attend Law School at the University of Texas; the Ambac lawyers are looking into possible payoffs to get him to change his testimony. They’ve also been granted a court order to get copies of emails from Van Leeuwen and the journalist he gave interviews with in an attempt to prove he lied under oath about not being a willing participant in our stories.

Luckily Van Leeuwen isn’t their only star witness; they have near half a dozen more insiders willing to speak out. Since my story at The Atlantic came out, the Financial Crisis Inquiry Commission got Verbitsky to show them his unpublished taped insider interviews, including – Van Leeuwen’s, and there is a chance they will subpoena Van Leeuwen to testify.

Ambac lawyers now wait for the good graces of a New York federal judge to let them submit their evidence in an amended complaint. A decision is expected by the end of the year. Although the American public, along with investors in JP Morgan, might be kept in the dark about who did what and how they did it, if a media company doesn’t pay to sue and unseal the case.

The Case is: AMBAC v EMC Mortgage Et Al New York Fed – USDC Southern District of New York – 110508 091754 – 08 CV

EMC was a wholly-owned sub mortgage company of Bear Stearns and is now owned and controlled by JP Morgan.

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Comments

  1. I know all the lawyers and legal beagles' who spent good loan money on mis-education don’t like to hear this type of talk, but it is what it is – like it or not.

    The court system is just as, if not more corrupt, than the financial system itself.

    As the Banks and Gov't transfer debt one to the other – the corrupted court system institutionalizes the crime with acquittal after dismissal after acquittal after dismissal almost exactly the way Pacino spelled it out in The classic closing scene of The Devil's Advocate.

    Kevin Lomax: Why the law? Cut the shit dad! Why Lawyers? Why Law?

    John Milton: Because the Law my boy – puts us into EVERYTHING. It’s the ultimate backstage pass. It’s the new priesthood baby! Did you know there are more students in law school than there are lawyers walking the earth? WE’RE COMING OUT, GUNS BLAZING! The two of you, all of us, acquittal after acquittal after acquittal until the stench of it reaches so high and far into heaven it chokes the whole fucking lot of them!”

    But as Lomax later pointed out to The Devil, “In the bible, you loose”.

    Now if your thinkin' this is off target – go research "Richard Fine". A top shelf PhD attorney who was wrongfully stripped of his license as an attorney, wrongfully imprisoned and now as a result, he's probably broke and facing foreclosure himself.

    Oh yea, California Judge Yaffe had Fine locked up WITHOUT BEING CHARGED for the last 18 months or so, in an LA County Jail under coercive confinement.

    Why you ask?

    All for busting up the biggest judicial corruption scandal in US history you may have never heard until now.

    Read up "The Sturgeon Decision", Read up on "SBX-211" and "retroactive immunity for corrupt Judges" and consider the implications of such precedent for more than 30 seconds.

    Gresham's dynamic is not restricted to any sector of society and doesn't give a shit about anyone's neatly pre-packaged context.

    In all my years of Aircraft Maintenance I can say with the utmost confidence that nothing brings people together FASTER than catastrophic failure; where the code of arms is to point the finger.

    smallz

  2. Sam in NYC says:

    I always thought these kind of back room dirty deals were happening by the big banks but it's rare we get to hear about them from journalist. Thanks for starting this blog Teri and telling the public what is really going on.

    Please update us if you find out what is in that Abmac suit against JP Morgan or what fraudsters are named as part of the charges.

  3. When you hear about judical corruption and all the fincial fraud going on these days it makes you wonder who to trust. Laws are supposed to protect the common citizen aren't they?

  4. Financial fraud supported by the legal system – not surprised. Whether it is JP Morgan or another major bank supported by the government, we all need the insight your blog is providing.

  5. Great blog Teri! Unfortunately, the case sounds all too familiar…

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  19. a p giannini - j p m says:

    Why want they post the fraud I want to see , the ceo james dimon of my chase bank took my grand mother property she passed on 1462 memorial dr atl ga 30317 and turn her death spot into a tire dump , tire dump scam . I want to see this fraud post live , nothing been added to – overheard at alliance bancorp and comments by bankofamerica.com back typed . Chicago il bankrupty blog , yet and the wellsfargo bank fraud nether , they getting away with fraud good and clean , I'm relly getting mad now . Because the jail are full of people who breaks the law and they in jail , what so good about them just born theves .

  20. Nobody told those theves to touch jpmorgan or nether banks thanks working , they running my banks of a funnie I'd card and a fake ss number and the card fake too , all the arrest already made in atl ga , fulton county da office , under gloria jean mayes . Age born may 27 1955 . And the arrest made in dekalb county ga on her too , more fraud than u can think , I'm the owner vitim of all of this , so how can their be a law suit of some fraud .

  21. I wouldn't give nobody a reason to sue , me , yall sueing the fraudulent people who running my banks with a fraudulent ss number and card and a fraudulent I'd card , they don't no my ss number , and I didn't get a I'd card made onto 2004 , 4 years after the financer pass away , james williams g , fulton county ga , 1436 sharon st atl ga 30314 , and his mother passed at the 1460 memorial dr se atl ga 30317 , they foward my name to run the bank threw the fulton county probate court by fraud , under gloria jean mayes , who I had arrested well took out a warrent on 2002 arrest made 2004 due to the 100,000 s of address she had from the jpmorgan chase bank property unit and wellsfargo banks as well attacted , to jpmorgan , and ap pagiinini , which are the same person , just a lot of diffent name s .gloria jean mayes been book into 2 jail beacuse of my family . Dekalb county jail and fulton county jail , but she never been to prison for all the fraud , and its a lot of fraud . Huge amount at that . Let's see this stuff make news , that makeing people want to kill them selfs , they run both my plane into the twin towels delta air line and norwest airline , continental bank , norwest bank corp . Let's see this make news global . So the theves a run , and leave my companies for me the real man too run it . I have all the I'd and real credic report u want to see , I call a cop to I'd me -ll get a finger print too , I am who I say I am . But are they who they saying they are , no because their not too me only one .

  22. I had a talk with nicole from my chase manhatten bank co in texas , and she said , all of ya I'd information is in the company computer up , here , they I'd frauder and ss number theves must don't have your ss number , but nicole has it and the executor office of texas do , and the irs , michael grimes known to the irs under united financial mortgage corp , wellsfargo , national city bank , great suburban bank ,alliance bank , they should have been took down , I report the fraud to the major fraud unit of atl ga in 2002 , and a arrest made in 2004. , but I had to find the folks my self , the theves have 62 million properties address , they had to been doom to have all of that and live on the west side of atl ga , its very poor over their , arrest warrent name was gloria jean mayes , and what so werid about the crap – is the ceo of chase james dimon , turn my grand mother which is jpmorgan child mother passing away – well she died on the property, they turned into a tire dump scam , in the city of atl , 1460-1462 memorial dr atl ga 30317 , also my brother girl friend passed their , too , ceo of my grand mother bank , she hunting u rite now , burton&mitchell , grimes&rockefella , pierpont&williams .hamilton&burr. Richard grimes , richard ogltree .walker&schwabs ,merrill&mitchell . Co . That a lot of fraud at hand . Gloria jean mayes been arrested in dekalb county for , fraud and elder fraud , and court running companies off a fake lisense , I don't no how fulton county let her go on the fraud , court fraud at that . She use the judge on the fraud over their like a trash can getting trash .

  23. public research . says:

    John d rocfella – who is the theves show ya self , stop hidden like a little girl , if u bad a nuff to take all this , show it off , the rockefella got that power like and are gods of the skys , jesus sons . And family their , john rockefella jr was a middle east mixed with italy and scotland . This fraud gone get it one way of nother . Theves should no something this big , they got to be powerful to have and run all of that . J pmorgan jr , a p giannini , provincial bank fraud is up too , the rockella own everything and if that stolen everything stolen , then the vitim saying the fraud took place from a black american lady , I never see a or have seen this arrest on the person have yall ?

  24. grimes&williams says:

    They want that fraud suit covered up. Jpmorgan – because they are theves and killer – ckeck gloria mayes , arrest record dekalb county ga , under chase bank . Fraudulent lisense , attemp to murder , u name the crimes they have , with only 4 mouths to at the most of prison time . I wish I could be lucky like them on crimes . They getting away with everything.

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  26. I bank with chase and bank of America , if the cops let’s a trust robbed him , they a let Them robbed us too , so in otheR word the cops got a hand in the fraud too .man u can’t trust ya own lawyer and trustee or ya court house .

  27. the florida default law group says:

    Ok the benifary of those, banks, been rob , by the trustor who pick the trustee ,the trustee took the benifary owner inhertance , and his benifary rights , and then they running those bank off a state lisense and they should have city and state lisense . The banks are unlisensed . Fraud in the making .wellsfargo homeloans inc has a lisense .morgan investment has a lisense . But all the rest of them don’t .

  28. I ask the bank to show me a tax record on deutsche bank and united financial group ,and he said I can’t get it from the irs cause I don’t no the owner ss number and address , so I said how are u running the banks then ? Isent deutsche bank morgan grenfeild co and jpmorgan .

  29. pattie hanes says:

    U people looking at us for wrong doing , u need to look at who made the laws on all of this from the get go ,was it all of those older age people who can’t get around and see a new 21 century way of living , because the laws are working off laws in set of 1910, its 2012 ,laws need to be set to , fairness of all people living in the usa ,like this for a case of change ,why would a trustee have legal tittle over a person property ,and with full power of attorney ,too not let the owner of the property no he has the ownship ? Blind trustee with 14 years of power is fraud , they need to change all of that ,and let it be a- 11 year time frame at most .in some cases tho its says that a blind trust can be revoked by any judge in a court of law , if u got people protesting a company , a judge need to look at that asap , to see what they can change cause they have the power to do so , we done here . One more thing if a trust was inter into law as the trust can treat a person so bad to death in so many ways ,then who ever made that law , need to ckeck them selfs into the jail ,a deceased person can’t run a human being life from a grave .

  30. pattie hanes says:

    No benificary of no company or person has been rob , why cause , the law says , a trustee can do all of the stuff they do , and u can only sue them .but when u have people killing them selfs cause they don’t want to lose their house or car , then that more than a law suit too me somebody need jail , ether the trustee or the law maker them selfs , hey john , book mark this one , its hi level of* carmal* here ,its rated at 100% too,and a nother thing here john , why don’t u see united nation in the usa when they are doing their dirt ?

  31. I was a loan consultant for washington mutual for a lot of years. I saw so much it would make your hair stand on end…. We were told to get loans any way we could and the more you got good, bad, or indiffernt. was ok the more you brought in the more favors you received special underwriters, heads turned and loans were approved. When we bought out a sub prime lender things really went down hill fast. I would like to see these ceo’s go to trial.which will never happen. I lost all my stock options 401k and other things and now at almost 70 years old I have to go to work to survive.

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