JPMorgan blames risk management for "London Whale" loss

Wed Jan 16, 2013 4:19pm EST
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By Emily Flitter

NEW YORK (Reuters) - Peter Weiland, the most senior risk officer in JPMorgan Chase's Chief Investment Office before the "London Whale" scandal broke last April, quietly resigned in October, according to a report by the bank that emphasizes the CIO's risk-management failures.

Weiland's resignation had not been previously reported in the media.

The JPMorgan Chase & Co report (JPM.N: Quote) was released on Wednesday in conjunction with its fourth-quarter earnings. It cited failures in risk management inside the CIO and by JPMorgan's senior management.

"CIO risk management made a number of key missteps," the report said. It added that "the firm did CIO evolved commensurately with the increased complexity and risks not ensure that the controls and oversight of CIO's activities."

The CIO lost $6.2 billion when positions in a small, opaque derivatives market quickly lost value under a squeeze by several hedge funds. From the time the squeeze was first reported in April to a series of midsummer statements by JPMorgan and Chief Executive Officer Jamie Dimon, a number of managers at the bank lost their jobs or changed positions.

The bank conducted an internal investigation into the incident and regulators in the United States and the United Kingdom opened their own inquiries. The bank revealed in July that it found evidence some CIO employees in London might have attempted to hide losses in the CIO's books mis-marking the values of some derivatives trades. An investigation by the U.S. Securities and Exchange Commission and the Federal Bureau of investigation is continuing.

By at least August, Weiland had hired a lawyer to represent him in the investigations into the trading losses. He continued to work in risk management in the CIO until October, when he resigned.

Weiland's lawyer did not respond to requests for a comment.   Continued...