BankruptcyMisconduct is initiating coverage on the venerable banking and financial institution known as J.P. Morgan. Perhaps this time, our opinions won't be so quickly cast aside like flies impulsively rebuked by a horses tail. (Ed note: "Horses reads much better than what you had in the prior draft") In all seriousness, we believe that both a civil and criminal case against certain officers and the directors of J.P. Morgan could easily mushroom from the fertile quagmire which becomes the unraveling shamefulness heretofore named simply, in an apparent overabundance of deference, as Dewey LeBoeuf.

Does a "Sole Placement Agent" Sticker protect you from venereal disease?

Short answer: We don't think so. But let's be fair and balanced, and direct your attention to the obvious CYA language in the Private Placement Memorandum (which you can download free here) which played the role of "mini-prospectus" in the private underwriting available only to "accredited investors" a/k/a, rich guys like Mitt Romney. (To Romney's credit, he did buy any of this crap.)

the Sole Placement Agent is not responsible for, and is not making any representation concerning, the Company's future performance, the adequacy, accuracy or completeness of this Memorandum, the advisability of purchasing the Notes, the execution, validity or enforceability of the Notes or any documents delivered in connection with the Notes or the value or validity of any collateral or security interests pledged in connection with the Notes.

Your average American reading that will come to two conclusions: the Sole Placement Agent doesn't want to be liable for problems and the Sole Placement Agent either knows for a fact or suspects that there are problems. Yeah, often the extra language in a contract reveals much about the state of mind of the parties who are looking to get paid for doing something. That's our opinion of how ordinary people, sometimes known as jurors, are gonna view this thing.

"Unique", "Odd", "Different", "WTF"

To be sure, BankruptcyMisconduct is not the only voice noting the weirdness of the private placement. We find much comment in the venerable commercial media, including from lawyers, which has trouble viewing the $125 Million dollar folly as in conformance with a rational world view. Perhaps our inner Don Rickles is to blame for our irreverence to the storied histories of Dewey and Morgan - a funny story is a funny story.

Shutran's "Accounting Something" vis a vis the Saft Acknowledgement

Rich Shutran arguably stuck his neck out once "for the team" when he established scienter of his "Accounting Something" explanation for the $155 Million dollar gross revenue flip flop. At least Shutran may have limited the circle of risk to the Gang Of Four, or perhaps the Executive Committee. But we really gotta hand it to Stuart Saft, a modern day cross between a grandmaster chess player and Fletcher Reede. Oh yes he did! Stuart let the world know that all of the partners knew about the secret guarantees. When you fill out the "So you think you may be a RICO enterprise" worksheet they usually have a question or two in the beginning about secret payments, as well as obtaining funds under false pretenses. Yeah, it's a tough thing to explain away when you are defending your foray into the capital markets with consistent willful non-disclosure of secret money flow agreements. Big money flows. Big enough to derail the business.

How quaint that the media for hire so carefully limits their comment within the polite bounds of civil recourse. As if the word "Fraud" is just too judgmental. How could this conduct be considered anything other than fraud? Let's remember that Dewey LeBoeuf's own partners believed that the criminal line was crossed as they referred managements' conduct to a prosecutor. Sure, prosecutorial discretion is a loophole for quid pro quo corruption and might ultimately provide a softened landing for many, if not all, of the participants in organized crime. But this case may prove quite different.

There are a number of forces "conspiring" to ensure that the Dewey LeBoeuf Implosion becomes more interesting and of an even higher profile. As previously discussed, widely divergent circumstances regarding culpability, whistle-blowing incentive, and financial favoritism have been gnawing at the partnership. We believe that the prospective conflict among the partners will be even greater, and will grind salt into the wounds. We have predicted that lawyers would act logically in the face of prisoner's dilemma decisions even before the advent of official investigations and impending claw back repercussions. It is all going to be ratcheted upwards as the muck is trolled by "estate professionals" who are paid from the headless fee pot.

Partners who are not interested in personally funding the hundreds of millions of dollar shortfall will "find religion" very quickly as to their responsibilities to report criminal conduct of their formerly entrusted managing members. Anyone who values his million dollar house will realize that the best defense is to "enlarge the problem". If J.P. Morgan helps to pay off your creditors, maybe you'll keep the beach house. What we are trying to say is that we believe there are a whole bunch of lawyers, much smarter than us, who will seek to bring J.P. Morgan in on the fun, perhaps even to compensate the innocent partners directly. We'll see.

Everyone knows that When you lie down with dogs, you wake up with flees. But what is an underwriting desk supposed to do when one of your clients is sort of a family member?

So how would one characterize the relationship between the "old" Dewey LeBoeuf and J.P. Morgan? Did their passed interactions result in profits for each other? Looking at the allegations presented by sworn officers of the Court in the General American Mutual matter, it would seem that Dewey LeBoeuf was very much interested in favoring their "associated enterprises" over and above their own clients. Who's to say that a lender would be treated any better than a client?

We can speculate. The more that J.P. Morgan becomes ensared in the greater Dewey LeBoeuf saga, the better the personal financial outlook for many of the former partners.

It's that simple, and it's going to get that complicated.