Decades-long ties to Madoff cost JPMorgan $2.6 billion

Tue Jan 7, 2014 6:19pm EST
 
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By David Henry and Emily Flitter

NEW YORK (Reuters) - JPMorgan Chase & Co agreed to pay $2.6 billion to the U.S. government and Bernard Madoff victims to settle allegations that the bank failed to tell authorities about its suspicions of fraud at Madoff's fund.

Even as the bank cut its exposure to Madoff's fund to minimize its losses it what ended up being a $17.3 billion Ponzi scheme, JPMorgan never shared its doubts with U.S. authorities, government prosecutors said.

"The bank connected the dots when it mattered to its own profit but was not so diligent when it came to its legal obligations," Manhattan U.S. Attorney Preet Bharara said at a press conference.

"In part because of that failure, for decades, Bernie Madoff was able to launder billions of dollars in Ponzi proceeds essentially through a single set of accounts at JPMorgan," Bharara added. The bank's $1.7 billion settlement with the Department of Justice, part of the larger deal announced Tuesday, is the largest forfeiture a bank has ever had to pay to resolve anti-money laundering violations. The deal does not include charges against individuals.

The settlement is only the latest of JPMorgan's legal difficulties. In November, the bank agreed to a $13 billion settlement with the U.S. government over the bank's mortgage bonds. JPMorgan still faces at least eight other government probes, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate.

These are big payouts, even to a bank whose profit has topped $20 billion a year. The Madoff settlement underscores how being the largest U.S. bank can be a hindrance as well as a benefit to JPMorgan. Like its Wall Street rivals, JPMorgan a colossus in which internal communication is often imperfect.

"We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time," JPMorgan spokesman Joe Evangelisti said in an email. The bank filed a notice of suspicious activity with regulators in London in October 2008, but not in the United States, he acknowledged.

He added: "We do not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme."   Continued...

 
Workers are reflected in the windows of the Canary Wharf offices of JP Morgan in London September 19, 2013. REUTERS/Neil Hall