JP Morgan Rap Sheet - A History of Fraud & Bailouts
JPMorgan, which also got a $25 billion infusion from the Troubled Assets Relief Program (TARP), did not receive immunity from legal and regulatory problems. In September 2009 it was fined $300,000 by the U.S. Commodity Futures Trading Commission (CFTC) for violating rules relating to the segregation of customer funds. In November 2009 the SEC announced that J.P. Morgan Securities would pay a penalty of $25 million, make a payment of $75 million to Jefferson County, Alabama and forfeit more than $647 million in claimed termination fees to settle charges that the firm and two of its former managing directors engaged in an illegal payment scheme to win business from the county involving municipal bond offerings and swap agreements.
In May 2010 the FDIC announced that Washington Mutual and JPMorgan had agreed to settle claims relating to the bank’s failure. The agency did not cite the size of the settlement, but it was later reported to be about $6 billion. The following year, WaMu agreed to pay $105 million to settle an investor lawsuit relating to its collapse. Three former WaMu executives later agreed to pay $64 million to settle with the FDIC, but most of the money was to be paid from insurance policies the bank had purchased for them.
In June 2010 JPMorgan Securities was fined a record £33.32 million by Britain's Financial Services Authority for failing to protect client funds by segregating them appropriately from firm funds.
In 2011 JPMorgan found itself at the center of a controversy over improper foreclosures and excessive interest rates in connection with home loan customers who were members of the military. The bank agreed to pay $56 million to settle charges of having violated the Servicemembers Civil Relief Act.
In June 2011 the SEC announced that JPMorgan would pay $153.6 million to settle allegations that in 2007 it misled investors in a complex mortgage securities transaction. The following month, the SEC said that J.P. Morgan Securities would pay $51.2 million to settle charges of fraudulently rigging municipal bond reinvestment transactions in 31 states. The agreement was part of a $228 million settlement the firm reached with a group of federal regulators and state attorneys general.
Documents made public in early 2011 in a lawsuit against JPMorgan by a court-appointed trustee in the Bernard Madoff Ponzi scheme case suggested that senior executives of the bank had developed doubts about the legitimacy of Madoff’s investment activities but continued to do business with him. The lawsuit was later dismissed.
In September 2011 the Federal Housing Finance Agency sued JPMorgan and other firms for abuses in the sale of mortgage-backed securities to Fannie Mae and Freddie Mac. JPMorgan was one of five large mortgage servicers that in February 2012 consented to a $25 billion settlement with the federal government and state attorneys general to resolve allegations of loan servicing and foreclosure abuses. In March 2012 the CFTC announced that J.P. Morgan Securities would pay a $140,000 penalty to settle charges that one of its employees was involved in what was technically a fictitious sale of U.S. Treasury Note futures. The following month, the CFTC imposed a penalty of $20 million on JPMorgan for failing to segregate customer accounts being handled on behalf of Lehman Brothers prior to that firm’s collapse. And the CFTC later fined JPMorgan $600,000 for exceeding speculative position limits in cotton futures contracts.
In the Wake of the London Whale
After JPMorgan reported a $2 billion trading loss in May 2012, shareholders protested and the FBI opened an investigation of the matter. It later came out that top management at the bank had been alerted about the risky practices of a group of London-based traders (led by an individual know as the London Whale) who had caused the loss, which later grew to more than $6 billion. While critics of aggressive bank trading activities cited the loss as a reason for tighter regulation, JPMorgan’s Jamie Dimon appeared before the Senate Banking Committee to offer a perfunctory apology but mainly to defend himself and the bank.
In July 2012 JPMorgan agreed to pay $100 million to settle a class action lawsuit charging it with improperly increasing the minimum monthly payments charged to credit card customers.
In October 2012 New York State Attorney General Eric Schneiderman, acting on behalf of the U.S. Justice Department’s federal mortgage task force, sued JPMorgan, alleging that its Bear Stearns unit had fraudulently misled investors in the sale of residential mortgage-backed securities. The following month, the SEC announced that JPMorgan would pay $296.9 million to settle similar charges.
In December 2012 FINRA fined JPMorgan $465,700 for using fees from municipal bond offering to pay for lobbying activities. In January 2013 JPMorgan was one of ten major lenders that agreed to pay a total of $8.5 billion to resolve charges relating to foreclosure abuses. That same month, bank regulators ordered JPMorgan to take corrective action to address risk management shortcoming that had caused the massive trading losses. It was also ordered to strengthen its efforts to prevent money laundering. In a move that was interpreted as a signal to regulators, JPMorgan’s board of directors cut the compensation of CEO Jamie Dimon by 50 percent.
JPMorgan’s image was further tarnished by an internal probe of the big trading losses that found widespread failures in the bank’s risk management system. Investigations of the losses by the FBI and other federal agencies continue.
In February 2013 documents came to light indicating JPMorgan had altered the results of an outside analysis showing deficiencies in thousands of home mortgages that the bank had bundled into securities that turned out to be toxic.
In March 2013 the Senate Permanent Committee on Investigation released a 300-page report that charged the bank with ignoring internal controls and misleading regulators and shareholders about the scope of losses associated with the London whale trading fiasco. The committee also held a hearing in which JPMorgan executives were subjected to hours of intense questioning by both Democratic and Republican senators.
Later that month, the New York Times reported that the bank was facing investigations by at least eight federal agencies.
In May 2013 the Times revealed a new investigation of JPMorgan by the Federal Energy Regulatory Commission, which was said to have assembled evidence that the bank used “manipulative schemes” to transform money-losing power plants into “powerful profit centers.”
That same month, the Attorney General of California filed suit against JPMorgan, charging it with engaging in “fraudulent and unlawful debt-collection practices” against tens of thousands of its credit card customers in the state. The bank was accused of violating proper legal procedure while filing vast numbers of lawsuits against those customers.
In July 2013 Federal Energy Regulatory Commission announced that JPMorgan Chase would pay $410 million in penalties and disgorgement to ratepayers to settle charges that it manipulated electricity markets in California and the Midwest.
In August 2013 JPMorgan acknowledged that it faced criminal and civil investigations of its sale of mortgage-backed securities in the period leading up to the 2008 financial meltdown. That same month criminal charges were brought against two former traders at the bank for covering up the London whale debacle. And there were reports that JPMorgan was the subject of a bribery investigation in connection with the hiring of children of powerful officials in China.
JPMorgan's legal costs mounted in September 2013. First, it and Assurant Inc. had to pay $300 million to settle accusations that they forced homeowners into purchasing overpriced property insurance. A week later, the Consumer Financial Protection Board announced that the company would pay $80 million in fines and refund an estimated $309 million to more than 2 million customers for illegal credit card fees.
That same day, U.S. and UK financial regulators announced that JPMorgan would pay a total of $920 million to settle charges relating to the London Whale case, with the bank admitting that it had violated securities laws.
In October 2013 the Commodity Futures Trading Commission announced that JPMorgan would pay $100 million to settle charges that it violated the Dodd-Frank Act's prohibitions against manipulative conduct in the trading of certain credit default swaps.
In November 2013 JPMorgan agreed to pay $4.5 billion to settle claims by a group of institutional investors that the bank had sold them faulty mortgage-backed securities between 2005 and 2008.
Later that month, the Justice Department announced that JPMorgan had agreed to a record $13 billion global settlement of federal and state claims relating to the sale of mortgage-backed securities by the bank itself as well as Bear Stearns and Washington Mutual. Of the total, $4 billion would take the form of relief to homeowners.
In December 2013 JPMorgan was fined $108 million by the European Commission for its role in the illegal manipulation of the LIBOR interest rate index by major U.S. and European banks.
In January 2014 federal prosecutors announced that JPMorgan would pay $1.7 billion to Madoff victims in order to settle civil and criminal charges that it failed to alert authorities about large numbers of suspicious transactions made by Madoff while it was his banker. In a separate but related action, the Office of the Comptroller of the Currency fined JPMorgan $350 million for deficiences in its anti-money-laudering controls.
The company surprised and angered many observers, when, in the wake of these billions in settlements, it announced that Dimon would be getting a raise.
In November 2014 JPMorgan was fined $310 million by the U.S Commodity Futures Trading Commission and $352 million by Britain's Financial Conduct Authority as part of a settlement of charges that it and other major banks manipulated the foreign exchange market.
In December 2014 FINRA fined JP Morgan Securities $5 million as part of a case against ten investment banks for allowing their stock analysts to solicit business and offer favorable research coverage in connection with a planned initial public offering of Toys R Us in 2010.
In March 2015 the Justice Department announced that JPMorgan would pay $50 million to settle allegations that it had improperly submitted "robo-signed" documents to bankruptcy courts around the country in connection with cases involving more than 25,000 homeowners.
Two month later, the Justice Department announced that JPMorgan was one of a group of banks pleading guilty to criminal charges of conspiring to fix foreign currency rates. JPMorgan was fined $550 million (and another $342 million by the Federal Reserve) and put on probation for three years. The SEC gave it a waiver from a rule that would have barred it from remaining in the securities business.
In July 2015 the Consumer Financial Protection Bureau announced that JPMorgan would pay $136 million to the agency and to 47 states, along with $50 million in customer refunds, to settle allegations that it used illegal tactics to pursue delinquent credit card debt; another $30 million was to be paid to the Office of the Comptroller of the Currency.
In December 2015 the SEC fined JPMorgan $267 million to settle charges that two of its wealth management subsidiaries improperly steered clients to in-house investment products (the Commodity Futures Trading Commission added another $40 million to the penalty).
In November 2016 a subsidiary of JPMorgan reached settlements with the Justice Department (for $72 million), the SEC ($130 million) and the Federal Reserve ($61.9 million) in a case involving the hiring of children of Chinese officials to win business.
In January 2017 JPMorgan agreed to pay $53 million to settle federal allegations that it charged African-American and Hispanic mortgage borrowers higher rates than white customers.