jpmorgan chaseJPMorgan Chase (JPM) got a pretty sweet deal when it bought the distressed banking operations of Washington Mutual in 2008 for a flimsy $1.9 billion -- perhaps a little too sweet, according to the Federal Deposit Insurance Corp. (FDIC) and WaMu creditors.

After meeting with some WaMu's bondholders, the FDIC is considering pulling the plug on a deal that would allow JPMorgan to pocket a $1.4 billion tax refund related to Washington Mutual's losses in 2008, according to The Wall Street Journal. (The FDIC was not immediately available to comment.)

The problem, as WaMu creditors and shareholders see it, is that JPMorgan received $25 billion in government bailout funds, and those recipients are legally prohibited from getting special tax refunds allowable under the 2009 Stimulus Act.

Rigged Deal?

The tax-refund issue is just the tip of the iceberg for WaMu shareholders. They contend that the rushed JPMorgan-WaMu deal was rigged in JPMorgan's favor from the beginning and that they've likely lost more on it than any other involved party.

"I've had people calling me who lost half their retirement savings or who said their wives were going to divorce them," relates Michael Rozenfeld, an activist WaMu shareholder and operator of WaMuTruth.com. "It was really kind of depressing, and nobody has been trying to help any of us."

Rozenfeld, a 20-something engineer, estimates he personally lost more than six figures when the bank was seized in 2008.

Settlement Under Fire

"The bottom line is that right now the holding company of WaMu has $4 billion in cash that JPMorgan is holding on to, as well as two sets of tax refunds worth more than $5 billion," says Rozenfeld. "For some reason, two weeks ago, [WaMu] decided that it didn't want to litigate anymore and basically just decided to give all the money away under a 'settlement.' It's not a settlement. It's a surrender as far as I'm concerned."

Earlier this month, JPMorgan, the FDIC and Washington Mutual reached a tentative settlement under which JPMorgan agreed to turn over $4 billion in disputed deposit accounts to Washington Mutual but would receive a significant share of WaMu's tax refunds, which were valued at about $5.6 billion.

Meanwhile, Washington Mutual Inc., the holding company of WaMu's banking operations, has filed suit against the FDIC, seeking more than $13 billion in damages for arranging the $1.9 billion deal with JPMorgan, which allegedly dramatically undervalued the Seattle-based bank.

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