JPMorgan Chase has agreed to pay $ 2.6 billion to settle criminal charges for ignoring obvious warning signs of Bernard Madoff’s massive Ponzi scheme: $1.7 billion to the Department of Justice, $350 million to the Office of the Comptroller of the Currency, $325 million to Irving Picard, the trustee for the Madoff bankruptcy, and $218 million to plaintiffs in class-action lawsuits.
According to the US Federal Authorities, JPMorgan Chase bankers failed to inform US authorities about its concerns on the inconsistencies in Bernard Madoff’s behavior and his fund’s returns for more than a decade, as internal communications described in the agreement showed. Yet, JPMorgan stressed that they “do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme. Madoff’s scheme was an unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses”.
Under the agreement, the criminal charges will be deferred for two years as JPMorgan admitted its negligent conduct and will pay a huge compensation to victims of Madoff’s fraud, as well as reform its anti-money laundering policies. In fact, no individual executives were accused of wrongdoing. Also part of the deal, the bank has agreed not to apply for a tax deduction or tax credit for the $1.7 billion payment. The funds will go directly to the victims of Madoff’s fraud.
The bank has already set aside a $ 23 billion fund to cover its legal troubles since this settlement is the latest in a series of major deals it has made to resolve its legal troubles. In November, the bank agreed to pay $13 billion over risky mortgage securities it sold. However, JPMorgan has already said that it will have to increase the reserves by another $400 million and its fourth-quarter earnings will be reduced by about $850 million.
Preet Bharara, US Attorney for the southern district of New York, said that this fine is “the largest-ever bank forfeiture” as “JPMorgan as an institution failed and failed miserably”.
Please read the Financial Times article here.