gm-flags-ap-rencen-630Simpson Thacher, along with client JP Morgan, is being sued by General Motors after it failed to spot a $1.5 billion error made by a Mayer Brown paralegal on the GM side of a loan deal with the Employees’ Retirement System of the City of Montgomery, Alabama.

The suit was filed at the end of last month and relates to a $1.5 billion syndicated loan organized by JP Morgan to General Motors in 2009, before the auto company went bankrupt. The City of  Montgomery says it is representing some 400 participants to the syndicated loan to General Motors.

The mistake was made by a paralegal at Mayer Brown, which was representing General Motors and was not caught by Simpson, which was representing the lenders. Not catching the quite large mistake meant that a security interest on the loan was unexpectedly extinguished – against the interests of the 400 lenders and without their knowledge or agreement.

Had the interest been treated properly then the loan would have been repaid despite the fact that the car manufacturer went bankrupt after the loan was made.

As it is, the loan was repaid, but the creditors committee at General Motors now wants the $1.5 billion back. Source: ABA