U.S. authorities near deal with JPMorgan on Madoff violations
By Emily Flitter
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) is working with criminal and regulatory authorities on settlements over the bank's relationship with convicted Ponzi schemer Bernard Madoff, ones that would involve $2 billion in penalties and a rare criminal action, according to sources familiar with the matter.
The settlements would fault the bank for turning a blind eye to warning signs about Madoff's firm, which was revealed in December 2008 to be the operator of a massive Ponzi scheme, the sources said.
One source said JPMorgan employees in New York, through internal communications at the bank, expressed confusion about details of Madoff's activity and his fund's returns, but the bank decided not to file a suspicious activity report with U.S. regulators, despite the fact that its London office had filed a similar report with UK authorities.
JPMorgan spokesman Mark Kornblau declined to comment.
The criminal component to the case was first reported by the New York Times on Wednesday.
Madoff was convicted in 2009 of defrauding thousands of investors and is serving a 150-year prison sentence. JPMorgan has been accused of ignoring warning signs that Madoff's business was a fraud, often to win more fees and commissions.
Irving Picard, a trustee for Madoff's victims, accused JPMorgan of ignoring warning signs about Madoff and sued the bank for $19.9 billion. But a judge tossed all but $425 million of Picard's lawsuit. An appeal of the ruling by Picard to the U.S. Supreme Court is pending.
JPMorgan has said in the past there was no evidence showing that anyone at the bank knew of Madoff's elaborate scheme. The suspicious activity report the bank filed in London, two months before Madoff was arrested, described his investment performance as "too good to be true," according to Picard's lawsuit. Continued...