WILMINGTON, Del., December 7 (Reuters ) - Washington Mutual Inc made its final pitch for court approval of a $10 billion deal to end its two-year bankruptcy, saying it outweighed the risks of legal battles against JPMorgan Chase & Co and a regulator.

Washington Mutual filed for bankruptcy the day after regulators seized its WaMu savings and loan business, the biggest bank failure in U.S. history.

The bank was immediately sold by the Federal Deposit Insurance Corp to JPMorgan for $1.88 billion, which set off 18 months of courtroom warfare over who owned what.

The settlement gives immediate and known value, said Brian Rosen, of Weil, Gotshal & Manges, which represents Washington Mutual Inc, in his closing arguments.

Without the deal, the settling parties warned, creditors might have to wait for years while the company pursued litigation, and then they might get nothing.

The settlement divides about $10 billion in bank deposits, tax refunds and other assets that were claimed by JPMorgan, the FDIC and Washington Mutual.

Of the total, $7 billion would go to Washington Mutual, mostly to be distributed under the company's reorganization plan. The remaining $3 billion would be divided between JPMorgan and the FDIC.

The deal is opposed by shareholders and holders of other securities, who are getting virtually nothing.

The settlement has been a setup from the beginning, said Justin Nelson in his closing arguments. The Susman Godfrey attorney represents the official committee of equity holders, which has argued the company may have assets worth as much as $33 billion.

Never has such a large dispute been settled with such a lack of evidence on the record, said Nelson.

Bankruptcy Judge Mary Walrath said she would consider the evidence and issue a ruling. It's obvious I can't decide this on the fly.


Opponents used the hearings to highlight what they said was gaping holes in the company's presentation about how it evaluated and put a price on settling its legal claims rather than pursuing them in court.

An attorney representing holders of disputed trust securities that could be wiped out took aim at what she said were conflicts and cozy relations between JPMorgan and Alvarez & Marsal, a management consultancy that is supplying Washington Mutual with executives.

The outcome of the settlement appeared as if a group of insiders said just find a way to get the creditors paid off in full and give the rest to JPMorgan, said Robert Stark of the Brown Rudnick law firm.

JPMorgan's attorney argued at the hearing that the Wall Street bank was funding the settlement by giving up its claim to $3.4 billion of tax refunds due to the seized bank. JPMorgan was willing to do so in return for ending litigation and peace of mind and moving on with life.

Walrath has heard five days of testimony as the company tried to prove the deal is a reasonable settlement in return for ending numerous competing legal claims and counterclaims.

Rosen ran through a list of what shareholders cite as potential assets and dismissed it as a Tower of Babel. He noted that it excluded more than $20 billion of claims that could be brought against Washington Mutual by JPMorgan, the FDIC and holders of the bank's bonds.

The FDIC's attorney argued that without the settlement, the government agency was prepared to fight all the way to the U.S. Supreme Court over its claims in the bankruptcy.

The trial was marked by disputes over what evidence and testimony could be admitted. The company chose to exclude privileged client-attorney communication, in order to protect information it may have to use if the deal is rejected by the judge and litigation resumes.

Shareholders and other disgruntled investors did not call their own witnesses to try to prove the company would have been more successful if it had pursued litigation.

Instead, they tried to prove the company's advisers could not have evaluated the claims without advice of attorneys, opening the company to charges it lacks evidence to prove the worth of the settlement.

Founded in Seattle in 1889, Washington Mutual was once the largest U.S. savings and loan, with more than 2,000 branches, $300 billion of assets and $188 billion of deposits when it was seized.

The bank's fortunes rose and fell with the housing market, after it aggressively expanded lending to riskier borrowers in what became as subprime mortgages.

Individual shareholders have often appeared at the hearings and three addressed the court to detail their objections. Ilene Slatko of Wilmington, Delaware, called for a court-appointed trustee to take over the management of the company for the act of treachery of transferring what she said was $5 billion of life insurance-related assets to JPMorgan, which Rosen disputed.

The company's shares ended Tuesday at 6.5 cents in pink sheet trading. Shares of JPMorgan ended the day down 1.6 percent at $39.25 on the New York Stock Exchange.

The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-12229.

(Editing by Steve Orlofsky)