On November 12, I posted that the bid-rigging antitrust claim against JPM, potentially worth enormous treble damages to equity shareholders under the Clayton Act, ought not be dismissed on the grounds Examiner Hochberg proffered in his report. The examiner stated that for bid rigging to have occurred, all bidding banks would likely have had to conspire to let JPM win the FDIC's auction of WMB:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_W/threadview?o=lp&bn=86316&tid=601709&mid=-1&tof=58&m=me&so=L&rt=1&num=20&off=1
Last week I emailed Susman, Sargent, and Nelson, encouraging them to pursue an "information asymmetry" theory of bid rigging. On this model, evidence that JPM had more information than did other bidding banks concerning the identity and value of WMB's assets and liabilities would imply that JPM colluded with the FDIC in ensuring that JPM would win the auction. And this would constitute bid rigging. There would be no need for other bidders to have agreed to let JPM win, just that they knew less about the assets and liabilities than did JPM.
Good News
As expected, the attorneys did not write back, but fortunately the Equity Committee's objection filed today addresses this issue of information asymmetry, or as the EC brief calls it, "information disparity":
"The Examiner fails to take into account that the discovery from the FDIC would shed light not only on potential claims against the FDIC, but also on claims against others, particularly against JPMC. FDIC documents and witnesses may describe JPMC's communications with other bidders. They may demonstrate an information disparity between JPMC and the other bidders that motivated JPMC to engage in tortious conduct in an effort to obtain WMB assets." EC Objection to Plan Confirmation, p.36.
Kirsten Grind's 12/28/09 PSBJ report strongly suggests that this information asymmetry, and collusion between FDIC and JPM to fix the bid, indeed existed before WMB's seizure by FDIC.
She writes:
"Now, more than a year after WaMu’s closure, recently released court documents and an ongoing investigation by the Puget Sound Business Journal suggest that JPMorgan was working months in advance on a plan to acquire WaMu once the government seized the bank from its shareholders.
"The documents also appear to show that regulators were working with JPMorgan to structure the deal well before the bank was seized.
"The Business Journal reviewed more than 1,000 pages of internal JPMorgan emails and financial presentations produced as exhibits in court filings as well as public records released through the Freedom of Information Act, and interviewed dozens of people familiar with WaMu’s closure, including government officials, former regulators and outside experts.
"The new information shows that JPMorgan had a detailed plan to acquire WaMu from regulators as early as July 2008, more than two months before the tumultuous days in late September when the government formally signaled that it planned to seize WaMu and offer it to bidders.
"By Sept. 11, JPMorgan appeared to expect that WaMu would be taken over by the government, and was making detailed preparations to buy it as a distressed asset, according to the documents."
http://www.bizjournals.com/seattle/stories/2009/12/28/story1.html
The bid-rigging claim against JPM based on information asymmetry (information disparity) is the mother of all claims in this case, being worth possibly tens of billions of dollars. Thankfully, Susman is on its trail, referring to "potentially gargantuan antitrust claims against JPMC and other banks ...." EC Objection, p.24.
Things look quite favorable for us from here, assuming the judge now rejects the POR as she should, based on the EC's sound legal arguments.
