Ala. county sues JP Morgan over debt deals

Nov 13, 2009 @ 6:04 pm

By Associated Press

Alabama's most populous county filed suit Friday blaming Wall Street powerhouse JPMorgan Chase and others for the financial disaster that brought it to the brink of what would be the largest municipal bankruptcy in U.S. history.

The suit, filed in state court by Jefferson County, contends JPMorgan Securities Inc., JPMorgan Chase Bank, former Birmingham Mayor Larry Langford and dozens of other defendants were part of a conspiracy to generate huge fees through a series of deals called rate swaps.

The deals were supposed to help the county manage debt from a massive sewer renovation but instead generated huge fees and crippled the county's finances, according to the complaint.

"These transactions provided no value to the county or its citizens and created an inherently flawed financial structure that imploded within just a few years," said the complaint, which seeks an unspecified amount in damages.

The lawsuit also names Montgomery-based investment banker Bill Blount and lobbyist Al LaPierre, both of whom pleaded guilty to bribing Langford in deals that generated $7.1 million in fees for Blount's company, Blount Parrish & Co., which also is a defendant in the case.

The complaint parallels testimony in the recent criminal trial of Langford, who was convicted on 60 counts and removed from office. It also is similar to the federal government's civil complaint against JPMorgan Chase, which agreed to a more than $700 million settlement last week.

JPMorgan Chase issued a statement calling the county's lawsuit "meritless."

"Meanwhile, we continue to work to achieve a responsible restructuring of Jefferson County's financial affairs," it said.

Jefferson County is struggling to avoid filing what would be the largest municipal bankruptcy ever over some $3.2 billion in debt linked to deals dating back seven years. The county's interest payments skyrocketed during the global financial crisis, and it can no longer afford them.

Besides the companies and Langford, the lawsuit names two former JPMorgan Chase executives, Charles LeCroy and Douglas MacFaddin, and numerous unidentified defendants.

The suit contends JPMorgan got the county's business by making payments to Blount Parrish, which had conspired with Langford, who was president of the Jefferson County Commission at the time.

Testimony in Langford's trial showed Blount and LaPierre showered Langford with fancy clothes, checks and loan payments totaling some $236,000. Blount's firm received payments from the rate swaps in return, evidence showed.

The Securities and Exchange Commission sued LeCroy and MacFaddin last week saying the two were involved in the Jefferson County deals. Attorneys for both men denied they had violated securities laws.


What do you think?

View comments

Recommended for you

Featured video


Regulators' gloves are coming off with cybersecurity. Put up your dukes with these tips

Updated guidelines and some of the first-ever rule enforcements signal that regulators are getting serious about holding firms accountable for data breaches, according to special projects editor Liz Skinner and technology reporter Ryan Neal.

Recommended Video

Keys to a successful deal

Latest news & opinion

Blackrock exposed data on 12,000 financial advisers

The data appeared in three spreadsheets, linked on one of the New York-based company's web pages dedicated to its iShares exchange-traded funds

Advisers throw cold water on FIRE movement

Millennials love it, advisers don't: Turns out, extreme early retirement is a suitable goal for almost nobody.

10 universities with the most billionaire alumni

These 10 American schools have the greatest number of alumni who are billionaires.

Top-performing ETFs of 2018

The markets took a beating last year, but these exchange-traded funds bucked the trend

Morningstar says investors rushed the exits in 2018

Net flows into mutual funds and ETFs were the lowest since the 2008 financial crisis, while money-market funds captured inflows.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print