It was announced by multiple outlets yesterday that JP Morgan Chase Bank would pay a nearly $2 billion ($1.7 billion and some fees) penalty for its involvement (or lack thereof) in the Bernie Madoff Ponzi scheme case. The bank cannot write off the penalty as a tax deduction and the money will go to a fund to pay back victims of Madoff’s scheme.
Federal prosecutors had been investigating the bank regarding Bernie Madoff’s accounts, given they were his primary bank for over 20 years. The January 6 document released by New York District Attorney charges JP Morgan with “failure to maintain an anti-money laundering controls and failing to report suspicious activity on Madoff’s accounts,” in violation of the Bank Secrecy Act. It is apparently a record payout for violations of that law.
The bank also entered into a deferred prosecution agreement with the government, which means they will not be indicted as long as they go along with the government’s assertion of their wrongdoing, and implement new controls for anti-money laundering. The New York Times writes:
“The agreement, nearly unheard-of for a giant American bank and typically employed only when misconduct is extreme, underscores the magnitude of the case against JP Morgan.”
Over the past 12 months, JP Morgan Chase has paid $29 billion (not including today’s Madoff penalty) in government fines to close various investigations. There is a handy break-down by NPR’s Emily Siner here. The biggest contributors to that debt were the $13 billion to settle its mortgage-backed securities, $8.5 billion for wrongful home foreclosures, and $9.2 billion just for legal fees from the 3rd quarter of 2013.
But $30+ billion dollars? That’s merely a quarters’ profit for the largest bank in the U.S. Chase reported a net loss of half a billion in the third quarter of 2013, due to all the legal fees and fines it had to pay. The New York City attorney involved in the case, Preet Bharara, said Tuesday, “JP Morgan as an institution failed and failed miserably.”
But if the big bank has failed so miserably, why do they keep getting off the hook? JP Morgan ignored red flags of the Bernie Madoff Ponzi scheme for more than 15 years, and are basically getting off with a slap on the wrist, and exoneration of anyone personally liable for the ignorance. This has consistently happened throughout the last 3 years that JP Morgan has been under investigation for various crimes and wrongdoing.
Dennis Kelleher of Better Markets put it bluntly when he said, “Once again, not a single individual working for JP Morgan Chase has been held accountable. Banks do not commit crimes; bankers do. Until individuals, including executives, are held personally liable, fined and jailed, the crime spree will continue.”