Judge Jed Rakoff has again unleashed some of his obvious dislike for the major banks, this time on J.P. Morgan (NYSE:JPM) which orchestrated a loan for Mexican telecom company Empresas Cablevisión SAB, to the end that it would have evidently forced it to reveal its secrets to major competitor Telmex Internacional SAB, owned by Mexican billionaire Carlos Slim.
The basic practicals of the event surround the attempt be J.P. Morgan to transfer a loan it made to Empresas Cablevisión SAB to a company with ties to Telmex Internacional SAB. The consequences is they would have had to provide confidential company information to their competitor upon transfer of the loan.
Rakoff was having none of it, saying about J.P. Morgan that they had partaken in an “end run, if not a down right sham,” by working to turn the loan over to their rival.
It seems Rakoff is making a name for himself, at least in the sense that he understands better than most judges the nuances behind the deals going on behind closed doors, and is able to smell when something at least doesn’t sound right. I think banks aren’t going to want him as their judge when they deal with lawsuits going forward.
In reference to this specific case with the two Mexican telecom companies, Rakoff granted a temporary ruling blocking the transfer of the loan to to Banco Inbursa SA, the company owned by Slim.
The transfer, which can no longer go forward at this time, was for 90 percent of the $225 million loan.
An article in the Wall Street Journal stated that the terms of the loan would have forced information like “budgets, tallies of capital investments, strategic plans, contract terms for its subscribers and plans for improvements at its growing digital network in Mexico City.”
As you can see, it would have given them about all the secrets of the company and their future plans, along with all the terms of its contracts, which would have allowed Slim’s company to undercut and form his own plans based on his rivals’ complete strategy and terms.
The bottom line is Carlos Slim, who has a virtual monopoly on the phone lines in Mexico, for the first time is having a serious competitor challenge that portion of his empire, which is centered in Mexico City, which has a population of approximately 22 million.
Cablevisión has been successfully providing a serious threat to the market share of Slim, offer “triple play” deals, where consumers can acquire telephone, cable and Internet services as a bundle, which results in lower prices and a more convenient way to pay.
Judge Rakoff has ordered more hearings on the issue.
