The lawyer for the U.S. bank said Berliner Verkehrsbetriebe (BVG)
was looking for anyone other than itself to blame for the losses on
the collateralized debt obligation (CDO).
"Rather than simply accepting that it had been unfortunate in the
events that happened in the financial markets... BVG has decided to
follow a course doing everything it could to avoid paying its
debts... casting around for someone to blame other than itself,"
Laurence Rabinowitz told a London court on the first day of the
Problems arose simply because the transaction occurred just when
serious cracks in the world's financial system were appearing,
BVG, which runs the German capital's underground railway, tram, bus
and ferry networks, argues that it was misled by JPMorgan and the
bank's law firm, Clifford Chance, and that it did not fully
understand the risks involved. BVG is due to begin its defense on
Clifford Chance said in a statement the "claims against us are
misconceived and entirely without merit."
The transport authority maintains that the employee most closely
involved in the swap had no experience of the complex financial
derivative the bank had pitched to him and misunderstood it,
according to court documents.
CDOs are a series of assets, often high-yield junk bonds,
mortgage-backed securities, credit default swaps and other products,
put together by a bank and sold in tranches according to their level
of risk. They were marketed to investors as investments with a
defined risk and reward.
[to top of second column]
Following the 2008 financial crisis many investors who lost tens of
millions of dollars through such investments have questioned what
banks knew when they modeled such products and a number have brought
legal action against the banks.
Industry experts have also argued that some organizations may have
lacked the sophistication to understand CDOs.
The case comes after JPMorgan paid nearly $20 billion in 2013 to
settle assorted legal claims, including the "London Whale"
derivatives trading scandal.
(Reporting by Clare Hutchison; editing
by Louise Heavens)
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