JPMorgan Settles to Pay $1.7 Billion for Madoff Scam Involvement

Banker Resource
January 8, 2014 — 1,280 views  
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Over the past few months, JPMorgan Chase & Co. has been grabbing the headlines, but for all the wrong reasons. Perhaps the decision to pay $1.7 billion for resolving certain US claims is one attempt by the bank to fix its negative image in the market. The bank recently agreed to pay this massive amount for resolving the claims that it had a role to play in easing Bernard Madoff's Ponzi scheme. With this agreement, the bank has resolved another legal obstacle that it was facing.

JPMorgan pays for ties with Madoff

JPMorgan, the biggest bank in the nation in term of assets, got in a deferred-prosecution agreement with the attorney in Manhattan, Preet Bharara's office. It also recognized lapses in oversight linked to an account used by Madoff for funding his multimillion-dollar fraud.

It has been years since Wall Street firms have been fighting claims made by victims of Madoff's fraud. The claims were that companies ignored this fraud for long to continue reaping fees. For around twenty years, Madoff maintained his accounts with JPMorgan before confessing about the fraud which ended up costing about $17 billion to the investors. Presently, he is serving a federal sentence of 150 years in prison in North Carolina.

The bank has agreed for a two-count criminal information filing in Manhattan federal court. It has also agreed on cooperating fully with the investigation by the US government for two years from the execution of the accord. However, no individual charges have been made in the agreement.

The bank has several charges against itself, including failure in maintaining an effective and efficient money laundering program and failure to file a report about any suspicious activity. Led by Janie Dimon, CEO of JPMorgan, the bank had agreed on paying around $15 billion in 2013 for resolving other regulatory probes in practices which included energy trading and mortgage bond sales.

Deferred- Prosecution Getting Popular

Deferred-prosecution agreements have been used since the past few years by the Justice Department popularly for resolving criminal investigations and charges against big banks. In December 2012, HSBC Holdings Plc entered a deferred-prosecution agreement of around $2 billion for resolving allegations of violation of the US sanctions on Iran as well as that of money laundering.

According to the information given by Gibson Dunn & Crutcher LLP, between 2000 and 2005, the department entered in 35 corporate deferred-prosecutions as well as non-prosecution agreements. According to the law firm, since 2006, around 222 deals of this nature have been struck by the department.

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