Washington Mutual Argues JPMorgan Owes It $4 Billion

WILMINGTON, Delaware (Reuters) - Washington Mutual Inc told a federal judge on Thursday that JPMorgan should be forced to return more than $4 billion to the bankrupt holding company, whose bank was seized by regulators and sold to JPMorgan.

Washington Mutual Inc attorneys argued in a bankruptcy court that records and depositions show the disputed money was on deposit at the holding company's banks when they were seized last year in the biggest bank failure in U.S. history.

Attorneys for JPMorgan & Chase Co and federal regulators described Washington Mutual Inc's bookkeeping as a "shell game" that would require more evidence to determine if the money was a deposit or some other form of transaction, such as a capital contribution.

The judge, Mary Walrath, said she would take the issue under advisement and issue a decision at a later date.

The Federal Deposit Insurance Corp seized the banking operations of Seattle-based Washington Mutual in September 2008 and immediately sold them to JPMorgan for $1.9 billion. The thrift's holding company filed for bankruptcy protection the next day.

At issue on Thursday and subject to hundreds of pages of briefs and hours of depositions was more than $4 billion in deposits that Washington Mutual Inc said was held by Washington Mutual Bank fsb and Washington Mutual Bank.

"Not a single witness, not a single witness says the most obvious and fundamental thing, that the funds belong to JPMorgan," said David Elsberg, an attorney with Quinn Emanuel which represents Washington Mutual Inc.

JPMorgan attorneys argued that they have not had an opportunity to question top decision makers at Washington Mutual Inc about what they said were questionable transactions, some taken on the eve of the bank failure.

Robert Sacks an attorney with Sullivan and Cromwell which represents JPMorgan, described other transactions by Washington Mutual in which deposits were recharacterized as loans and back to deposits in the space of days for regulatory reasons.