January 8

JPMorgan to pay over $2.5 billion in Madoff fraud

The settlement is the largest-ever forfeiture by a U.S. bank and includes a deferred prosecution agreement.

By Larry Neumeister
The Associated Press

And Tom Hays

(Continued from page 1)

click image to enlarge

U.S. Attorney Preet Bharara announces a settlement with JPMorgan Chase & Co. on Tuesday in New York. “Despite all these alarm bells, JPMorgan never closed or even seriously questioned Madoff’s Ponzi-enabling 703 account,” Bharara said.

The Associated Press

"How much do we have in Madoff at the moment?" a bank analyst wrote in a 2008 email. "To be honest, the more I think about it, the more concerned I am."

In a statement, JPMorgan said it recognized it "could have done a better job pulling together various pieces of information and concerns about Madoff" but didn't believe any of its employees knowingly assisted the scam.

"Madoff's scheme was an unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses," the statement said.

It said it was making "significant efforts" to strengthen its anti-money-laundering practices and believed "the lessons we have learned will make us a stronger company."

Its shares fell 68 cents to $58.32 in trading Tuesday.

The deal was similar to one reached in late 2012 with the British bank HSBC, which agreed to pay $1.9 billion to settle claims it laundered money for Iran, Libya and Mexico's murderous drug cartels.

Madoff, 75, pleaded guilty and is serving a 150-year prison term.

When his scam unraveled, account statements for thousands of his clients showed $60 billion in assets. In reality, the roughly $17.5 billion in principal they gave him was almost gone.

A court-appointed trustee has recovered more than $9.78 billion — including a portion of the JPMorgan civil payout — to redistribute to clients that invested directly with Madoff. The $1.7 billion criminal forfeiture and will go to a second victims' pool, already with $2.35 billion, that is processing claims from clients of so-called "feeder funds" that also invested heavily with Madoff.

The JPMorgan 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 before the financial crisis - the largest settlement to date between the Justice Department and a corporation.

JPMorgan still has several lawsuits pending against it related to the high-risk mortgage bonds that soured after the housing market collapsed in 2007. There's also an ongoing criminal investigation the U.S. attorney in Sacramento, Calif.

The more than $2 billion that JPMorgan is paying is about 10 percent of the bank's $21.3 billion net income reported for 2012. It already has set aside $23 billion this year to cover settlement and litigation costs — including the $13 billion it agreed to pay in November in a settlement with the Justice Department over its sales of risky mortgage securities before the financial crisis struck.

 

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