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To: d:oug who wrote (91357)	11/22/2002 8:42:44 AM
From: long-gone	Respond to of 116753

Bloomberg /22 00:05 J.P. Morgan Wants `Disguised Loans' Evidence Barred at Trial By David Voreacos New York, Nov. 22 (Bloomberg) -- J.P. Morgan Chase & Co. wants to bar internal communications about transactions described in its court papers as ``disguised loans'' from a trial over whether insurers must cover $965 million in losses on trades with Enron Corp. The second-biggest U.S. bank sued 11 insurers that backed the value of gas trades between Enron, J.P. Morgan, and an offshore entity, Mahonia Ltd. Insurers claim the trades were actually disguised loans that let Enron hide debt before it collapsed last December, and the bank lied by promising Mahonia would take delivery of the gas. The bank claims the insurers knew the nature of the transactions and must honor their guarantee. It wants a judge to exclude ``J.P. Morgan Chase internal communications referring to `disguised loans,''' court papers said. The communications weren't specified in public documents. J.P. Morgan, which wrote off $456 million of trading contracts and loans with Enron, will lose almost $1 billion if it doesn't prevail at a trial. ``Most of the materials on both sides were filed under a confidentiality stipulation, so I can't get into the specifics,'' said John Callagy, a J.P. Morgan attorney. ``Right now, my hands are tied.'' J.P. Morgan spokesman Joe Evangelisti declined to comment. The insurers have until Monday to respond to the request before U.S. District Judge Jed Rakoff, who will preside over a trial in New York that begins Dec. 2. `Silver Bullet' Former federal prosecutor Christopher Bebel, who's now in private practice in Houston, said he expected J.P. Morgan to argue that the internal communications are too inflammatory. ``This is a silver bullet for the insurance companies, and the effect of this motion is to place a spotlight on this silver bullet,'' he said. J.P. Morgan also wants to exclude testimony from David W. Wilson, an oil and gas industry expert hired by the insurers who said in a March affidavit that ``unusual arrangements'' in the contracts with Enron suggest they may have been loans. In addition, the bank is seeking to prevent the insurers from introducing testimony given in pretrial depositions by Enron's ex- president Jeffrey McMahon and former Treasurer Ben. F. Glisan Jr. The court papers don't specify what the testimony was. Celia Barenholtz, an attorney for Travelers Casualty & Surety Co. and other insurers in the case, declined comment, saying that most of the documents were under court seal. The insurers, which include Liberty Mutual Group and St. Paul Cos., issued surety bonds to guarantee that Enron would deliver natural gas and crude oil to Mahonia. `Hide Debt' Members of the U.S. Senate Permanent Subcommittee on Investigations said in a hearing this summer that Mahonia was controlled by J.P. Morgan. The bank's chief executive officer, William Harrison, told the committee in a statement that J.P. Morgan incorporated Mahonia in 1992 as an independent company. Though it was sponsored by the bank, Harrison said in the statement, J.P. Morgan had no direct control of the entity. At the hearing in July, Sen. Carl Levin cited a 1998 e-mail between bankers in which one said Enron loved such transactions because ``they are able to hide funded debt from their equity analysts,'' they allowed them to defer revenue, or ``(better yet) bury it in their trading liabilities.'' Donald McCree, a managing director for J.P. Morgan Securities Inc., testified that the e-mail was ``an unfortunate statement'' that did not reflect how the bank viewed the transactions. Rakoff ruled this month that ``a reasonable juror'' might conclude that the deals were a fraud. Callagy said he was confident that a six-member civil jury will reject fraud allegations made by the insurers. ``They signed a contract with us, they knew what the transactions were all about, and they should pay,'' Callagy said. ``It's very simple. They didn't misunderstand, they knew exactly what they were doing. They weren't defrauded. They just made that up.'' quote.bloomberg.com