JPMorgan Says It Was Tricked Into Keeping Lehman's `Goat Poo' Collateral

Lehman Brothers Holdings Inc. tricked JPMorgan Chase & Co. into holding onto collateral that the bankrupt investment firm internally described as “goat poo,” according to a court filing by JPMorgan.

JPMorgan was stuck with Lehman’s worst securities backing $25 billion of loans as Lehman was sold to Barclays Plc in September 2008, JPMorgan said in its filing yesterday in U.S. Bankruptcy Court in Manhattan. Lehman described the collateral as “toxic crap” and “goat poo” to be scattered “in other people’s backyards,” JPMorgan said.

“Only later was JPMorgan able to determine that the position in which it unexpectedly found itself was the result of collusion and deception” by Lehman and Barclays, JPMorgan said.

The accusations appeared in amended counterclaims against Lehman in its lawsuit against JPMorgan. Both companies are based in New York.

Lehman accuses JPMorgan of siphoning billions of dollars from Lehman, leading to it collapse in September 2008. London- based Barclays bought Lehman’s broker-dealer unit after Lehman’s bankruptcy filing.

Kimberly Macleod, a spokeswoman for Lehman, and Mark Lane, a spokesman for Barclays, both declined to comment.

The case is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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