Alabama Sewer-- JP Morgan And Jefferson County Suing Each Other On Corruption Charges

Jefferson County, Alabama is no hick backwater. It's metropolitan Birmingham-- city and suburbs-- and it has a population of close to 670,000. It's one of a handful of Alabama counties with home-rule governance allowing a County Board of Commissioners a deal of independence from the state. The two congressmen who have long represented the county and extremely corrupt conservatives, Artur Davis, a nominal Democrat recently defeated in a run for governor, and Spencer Bachus (R), a shameless Wall Street shill who chairs the House Financial Service Committee. Although Republicans generally control the county government-- all 3 of the powerful county commissioners are die-hard Republicans-- the county bucked the rest of Alabama in 2008 and voted for Obama over McCain 52.3- 47.2%. And the county is in trouble-- no, no... more than other counties. JP Morgan is threatening to sue them. For accepting bribes... from JP Morgan, the bankrupt county's biggest creditor. And the county is suing JP Morgan on corruption charges.

The county owes creditors, with JP Morgan in the fore, around $3.2 billion, ostensibly used to repair and expand the county sewer system but much of it making its way into politically-connected pockets. One of the crooked commissioners, David Carrington, was in NYC this week trying to stampede the JP Morgan into settling.

Carrington said the county still has considerable means at its disposal as it negotiates a debt settlement-- the county's civil case against JPMorgan Chase. He said the firm has already written off about $33 billion in bad debt, about 10 times higher than the county's $3.2 billion.

"I know you want us to settle," Carrington told the audience. "And I want to settle. But the settlement today would require us taking that civil litigation off the table."

The county sued JPMorgan and others in November 2009, contending that some of the county's sewer bond deals were tainted by fraud and conspiracy. By holding firm on the litigation, Carrington said, the county maintains a strong bargaining position and a debt settlement remains a very real possibility.

"If we don't settle, there will come a day, in the next five years, 10 years, the next 15 years, where JPMorgan will have to come before a jury of their peers in Jefferson County, Alabama, and answer for what they've done, both on the sewer side and on the general side," Carrington said. "My guess is this county could be the richest county in the world."

Carrington drew laughs for this prediction.

"So I would respectfully suggest if they're listening, and I know they are ... that we come to a reasonable settlement before you have to face a jury of your peers in Jefferson County," he said.

HuffPo's Zach Carter writes:

"After bribing public officials in order to sell bonds and derivatives to Jefferson County, Alabama, JPMorgan Chase may sue the county for $778 million. Bond insurers are refusing to pay off JPMorgan's claim on the bribery-induced debt, arguing that, because JPMorgan bribed public officials in order to close the deal, the insurance contract on that deal is bunk. This deal has already wrecked the county's finances, and local officials have gone to jail for their role in the scam. If JPMorgan can't collect from bond insurers, it may point its lawyers at Jefferson County itself. The House of Morgan's argument? County officials told us to pay the bribes. Really. That's actually the defense. Per Bloomberg: 'Payments to friends of the commissioners were directed by the county officials and disclosed in letters to them, according to the bank.'"

Bloomberg put it a bit more genteelly. "JPMorgan Chase & Co. said it will seek at least $778 million from Jefferson County, Alabama, if it loses lawsuits brought by companies that insured the county’s defaulted sewer debt," it explained, somewhat cryptically.

JPMorgan, which underwrote $3 billion of the debt sales and sold the county derivatives to lower its borrowing costs, is fighting claims filed by Syncora Guarantee Inc. and a unit of Assured Guaranty Ltd. in New York state court.

The bond insurers accuse the bank of concealing payments of $3 million to friends of county commissioners in order to win business. They also said the bank didn’t disclose an engineering report saying the sewer system wouldn’t be able to pay its debt.

“JPMorgan demands that Jefferson County agree to indemnify and hold JPMorgan harmless for any losses or costs, including attorney’s fees and expenses sustained by JPMorgan,” wrote Mary Beth Forshaw, an attorney at Simpson Thatcher & Bartlett LLP representing JPMorgan, in a letter to the County Commission.

The existence of the letter, dated Jan. 31, was previously reported by the Birmingham News. Justin Perras, a JPMorgan spokesman, declined to comment.

Syncora and Assured took JPMorgan to court after Jefferson County’s refinancing of sewer debt issued in 2002 and 2003 collapsed during the credit crisis and almost bankrupted the county. Syncora insured about $1.2 billion of the sewer debt and a $165 million surety policy. Assured provided almost $400 million in coverage.

In response to a lawsuit from Jefferson County, the bank said the county took on too much debt and knew the financing had risks. Payments to friends of the commissioners were directed by the county officials and disclosed in letters to them, according to the bank.

This is a case of corrupt politicians and corrpupt banksters working hand in hand to rip off the people, screwing it up, and turning on each other. Everyone deserves exactly what they get, especially the teabagging imbeciles who elect these kinds of civic leaders.