"Enron, J.P. Morgan Chase Bank, and Offshore Special Purpose Vehicles"

by Janet Tavakoli

Summary:

When Enron declared bankruptcy on December 2, 2001, J.P. Morgan Chase Bank ("J.P. Morgan") had $965 million in losses from payments due on oil and gas contracts with Enron. J.P. Morgan thought the contracts were hedged with surety bonds. The surety bonds were advance payment bonds that guaranteed Enron’s credit risk on pre-paid oil and gas forward delivery contracts.

J.P. Morgan lost a pre-trial bid in the Southern District of New York to get immediate payment from the insurance companies. As reported by Bloomberg news, in an affidavit filed in New York District Court, David Wilson outlined the gist of Enron’s transactions, and this article is a reconstruction of one of the transactions based on TSF's interpretation of that account.

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