NEW YORK - J.P. Morgan Chase & Co. is trying to bar evidence of internal communications describing trades with Enron Corp. as "disguised loans" at a trial aimed at forcing insurers to cover $965 million in losses on the transactions, according to court papers.
The 11 insurers, who backed the value of gas trades among Enron, J.P. Morgan and an offshore entity, Mahonia Ltd., refused to honor the claim, arguing that the bank had used the trades as camouflage for lending Enron money. Enron, once the world's largest energy trader, sought bankruptcy protection in December.
Keeping the internal documents out of court could be crucial to J.P. Morgan's case, some lawyers say. The $965 million in losses would wipe out almost a third of the $3.1 billion in profit before taxes the bank earned in the first nine months of this year.
"This is a silver bullet for the insurance companies, and the effect of this motion is to place a spotlight on this silver bullet," said former federal prosecutor Christopher Bebel, who's now in private practice in Houston.
J.P. Morgan asked 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.
The bank already has written off $456 million worth of trading contracts and loans with Enron.
J.P. Morgan refused to describe its argument for excluding the communications from the 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."
The insurers have until Monday to respond to the request before U.S. District Judge Jed Rakoff, who is to preside over a trial in New York that begins Dec. 2, the one-year anniversary of Enron's bankruptcy filing.
The company 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 former president, Jeffrey McMahon, and its 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 to comment, saying that most of the documents were under court seal.
J.P. Morgan's shares rose 10 cents to $24.99 yesterday.