Jersey law firm Mourant du Feu & Jeune’s chairman Ian James has been cross-examined in a case brought by German bank WestLB, which alleges that disguised loans were made by JPMorgan Chase to Enron.
The High Court action is one of the most significant cases to arise out of the collapse of the disgraced energy giant.
James was brought to the stand at the High Court on 23 June as part of WestLB’s claims that a series of transactions between Enron and JPMorgan Chase were simply loans used to show that the energy giant had a “larger operating income”.
JPMorgan Chase and Enron, however, allege the transactions were commodities trades. Lord Grabiner QC, instructed by Slaughter and May for JPMorgan Chase, has accused WestLB of failing to respond to disclosure requests for two years, and has described its claims as “baseless”.
WestLB’s involvement is down to the fact that it issued a letter of credit in 2001, effectively guaranteeing payment in the event of a default on the transactions. JPMorgan Chase claims, therefore, that WestLB is liable under this security agreement. WestLB, instructing Berwin Leighton Paisner partner Alex Gordon and Fountain Court barrister Michael Brindle QC, denies this, claiming it was misinformed about the true reason behind the transactions.
WestLB alleges that Mahonia, a Jersey special purpose vehicle administered by Mourant, was simply a “creature” of JPMorgan Chase rather than an independent trading company body.
WestLB claims that JPMorgan Chase used Mahonia to present a fictional impression that the transactions were commodity trades.
James, Mourant chairman and also a director of Mahonia, was subjected to vigorous cross-examination from Brindle.
In seeking to prove that Mahonia was a “creature” of JPMorgan Chase, Brindle cross-examined James over why he had no knowledge of the purpose of one of 12 transactions that Mahonia carried out on behalf of JPMorgan Chase.
The High Court also heard that Mahonia had breached Jersey law in failing to prepare statements of accounts relating to the JPMorgan Chase transactions since 1996.
James expressed “concern” that he “did not know” whether Mahonia had information to prepare a statement of account for this period since 1996, or what information was required to make such a statement.
JPMorgan Chase, Mahonia and Mourant declined to comment.