J.P. Morgan Chase Wins Ruling in Enron Dispute

J.P. Morgan Chase & Co. said Tuesday that a London court ordered Germany’s WestLB to pay $165 million plus interest and costs to the U.S. bank in a suit related to the collapse of Enron Corp.

The case is a victory for investment banks seeking to recoup losses on transactions with Enron entities.

“They’ve been beaten to death on this [Enron] so far and this is the first glimmer of light,” said analyst Dick Bove with research firm Hoefer & Arnett.

WestLB had not honored a $165-million letter of credit purchased to guarantee a prepaid gas contract between J.P. Morgan and Enron against default. The deal was done through one of the energy company’s now-infamous special purpose companies known as Mahonia.

WestLB had said it would not pay up on the letter of credit, calling the deal between Enron and J.P. Morgan fraudulent.

But on Tuesday, Justice Jeremy Cooke of the High Court of Justice in London, where Mahonia was based, said the transaction was proper and rejected WestLB’s allegations.