On Wednesday, JP Morgan Chase & Co. witnessed a painful alarm that it had to live with the error. This is in reference to a clerical error that would cost JP Morgan about $1.5 billion.
On Wednesday, a Manhattan federal penal court ruled that even though it wasn’t done intentionally by JP Morgan, in 2008 it visibly authorized its law firm to file papers, which unsecured its majority of loan to General Motors.
It was a critical difference because General Motors soon after getting loan filed bankruptcy. As per General Motors filed protection of Chapter 11, secured lenders will be fully repaid whereas unsecured lenders will not get anything. One of the JP Morgan spokesman said that it was revising the available options and decisions.
The problem includes the non-deliberate release of a lien on auto maker’s equipment and other assets. The automobile company was planning to repay a $300 million liability and had the document ready by Mayer Brown law firm. The firm unintentionally involved a lien securing the loan of $1.5 billion in the security interest list, which the company terminated after the payment of $300 million.
In the year 2009, General Motors after filing bankruptcy protection, the unsecured creditor’s official committee requested the judge to give decision that the administered loan of $1.5 billion by JPMorgan was unsecured due to some error. JP Morgan claimed that the loan still in effect as it was unintentionally dismissed.
In 2013, Robert Gerber, United States bankruptcy judge backed Morgan claim. He said, It was primarily tempting to let the lenders live with their mistakes. But he thinks Morgan had not specifically authorized the closure of loan.
Robert Gerber ruling was reversed by the three judges at US court of Appeals in Manhattan. They found that although Morgan had never planned to dismiss the loan security interest, but it has given its authorization effectively.
JP Morgan's managing director was held responsible by US appeal court for the $1.5 billion loan as the filings which ended the security interest was revised by him and the other law firm Simpson Thacher & Bartlett, which was hired by JPMorgan Chase & Co.(NYSE:JPM) for all the paper work. And also General Motors and its law firm Mayer Brown LLP.
Mayer Brown spokesman refused to comment on the event mentioning the policy of not discussing matters in court case. GM’s law firm Simpson Thacher was not available to discuss the matter.
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