Billion Dollar Mistake Goes Unnoticed Erasing Interest Gain
A Federal Court appeals found a big error made from a paralegal at Mayer Brown firm, involving the wipe off of a security interest of a loan from JPMorgan Chase to giant car manufacturer, General Motors. Partners at Mayer Brown also did not notice the1.5 billion dollar error while working on the case.
The mistake did not cause that much damage, given that Mayer Brown was representing GM at the time. A paralegal at Brown was instructed to put together and draft an array of documents in order to issue the interest rates applicable to the amount of 300 million dollars that General Motors was in the process of paying off. However, along with the appropriate documents, the paralegal also brought in a third unrelated contract which featured 1.5 billion dollar credit that required J. P Morgan to act as the party of record.
This billion dollar error was over seen not only by everyone at General Motors and J.P Morgan, but also by the lawyers and partners at as well as Simpson Thacher & Bartlett, the counsel on the deal. However, the appeal court remains that the necessary documents were not send to the parties above for review and final approval. The error resurfaced when General Motors declared bankruptcy protection in early 2009.
A committee came to the conclusion that JP Morgan should not receive the security interest from GM, given that the error happened in their offices and went undetected by multiple partners for several months. The Court of Appeals ruled against Chase in the matter, and decided that whether the mistake was intentional or not, it was reviewed by their attorneys and executive, and then signed. In a 15 page opinion document, the appeals court quoted “ JP Morgan reviewed and assented to the filing of that statement- nothing more is needed.’’