JPMorgan Chase & Co got a painful reminder on Wednesday that we all have to live with our mistakes, even a clerical mix-up that could cost $1.5 billion.
A federal appeals court in Manhattan ruled on Wednesday that, although it was not JPMorgan’s intention, it clearly authorized its law firm to file papers in 2008 that unsecured much of a loan to General Motors.
The difference was critical because the automaker soon after filed for bankruptcy. During GM’s Chapter 11, secured lenders were repaid in full while unsecured creditors lost out.
JPMorgan said it was reviewing the decision and its options.
The dispute involved the unintentional release of a lien on GM fixtures and equipment. At the end of 2008, the automaker was preparing to pay off a $300 million financing and had the Mayer Brown law firm ready the documents. The firm accidentally included a lien that secured the $1.5 billion loan in the list of security interests it terminated after the $300 million was repaid. Read more.