In this breach of contract action, the plaintiff seeks to recover damages for the loss of more than $1 billion from investment accounts created to fund notes it guaranteed. The plaintiff alleges that the defendant, investment manager J.P. Morgan Investment Management Inc., failed to manage the accounts. Instead, defendant continued to hold toxic subprime securities in the accounts while its corporate parent, J.P. Morgan Chase, reduced its exposure to the same type of securities based on its knowledge that they "could go up in smoke."
The undisputed facts of the case are as follows: The plaintiff, Ambac Assured U.K., guaranteed timely payment of principal and interest for certain notes issued by Ballantyne, a special purpose vehicle established to reinsure term life insurance policies. To capitalize itself and finance the required reserves, Ballantyne issued more than $2 billion in securities.
On May 2, 2006, Ballantyne and the defendant entered into an investment management agreement (hereinafter referred to as the "IMA") pursuant to which defendant agreed to act as the investment advisor for $1.65 billion of the proceeds raised by Ballantyne via its sale of the notes1 . Pursuant to the IMA, Ballantyne opened two accounts: the Reinsurance Trust Account and the Pre-Funded Account over which the defendant had full investment authority subject to the investment guidelines.
The guidelines state that the goal of the investment policy "is to obtain reasonable income while providing ahigh level of safety of capital" (emphasis added). They identify the nature, quality and diversification requirements of the investments and contain specific limitations for investments on the basis of sectors and ratings.
The guidelines set forth the percentage of account assets which could be invested in each class and sector. Accordingly, permitted securities included home equity loan asset-backed securities (hereinafter referred to as "HELOS") and mortgage-backed securities like Alt-A's (hereinafter referred to as "MBS"). These securities required ratings of "A" through "AAA," and could not exceed percentages of 60% and 50% of the accounts, respectively.
As of May 2006, the defendant began purchasing securities for the accounts. The record reflects that as of January 2007, approximately 30% of the assets in each account was invested in MBS, and approximately 59% of assets in both accounts was invested in HELOS. Subsequently, the accounts began sustaining losses. On December 28, 2007, after the accounts suffered significant losses, the guidelines were modified to require the defendant to seek approval from Ballantyne and the plaintiff before buying or selling assets for the accounts. The amended guidelines contained the same investment goal as the original guidelines, namely, obtaining "reasonable income while providing a high level of safety of capital."
Approximately, one year later, in October 2008, Ballantyne terminated the defendant as its investment advisor. By this time, the accounts allegedly had lost $1 billion of the $1.65 billion entrusted to the defendant just 30 months earlier.
Ballantyne subsequently failed to make scheduled payments under the notes, and the plaintiff's guarantees were called upon.
In or about June 2009, the plaintiff commenced this action on behalf of Ballantyne seeking damages arising from the defendant's alleged breaches of the IMA, and of Chapter 13 of the Delaware Insurance Code. The plaintiff also alleges a breach of fiduciary duty, and a tort cause of action in gross negligence.
This, the article states, led to his team "mostly exiting the business of securitizing subprime mortgages" with the result that in late 2006, J.P. Morgan Chase "started slashing its holdings of subprime debt. It sold more than $12 billion in subprime mortgages that it had originated."
The plaintiff's breach of contract claim rests on the allegation that while J.P. Morgan was actively divesting itself of the risky subprime mortgages it had originated, the defendant was doing nothing about riskier subprime mortgages originated by others and held in the subject accounts6 . In other words, that the defendant continued to invest in securities which it knew were entirely incompatible with plaintiff's investment objective and stated goal to "obtain reasonable income while providing a high level of safety of capital."
Alles genau unter http://www.leagle.com/...amp;docbase=CSLWAR3-2007-CURR&SizeDisp=7
Kurzbeschreibung:
JPM steigt als Investor bei einer Firma ein und übernimmt dabei die Kontrolle über das Investment mit klaren Formalzielen über die Geldanlageformen. Dann brechen sie diesen Vertrag, in dem sie den Immobilien-Müll aus ihrer JPM an die Firma (hier Ballintyne) verkaufen, ohne das die wissen das die als Müllheide dienen, nur damit JPM saubere Bücher hat. Das ganze fand 2006 statt, schnell und kurz vor dem Exodus. 2006 brach der US-Immomarkt schon ein. Also noch schnell als JPM sich von so viel Müll wie möglich trennen, auf Kosten Dritter (hier Ballintyne die das Problem mit AMBAC haben). |
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