JP Morgan to pay $1.7 b to settle Madoff criminal case
Monday, 13 January 2014 00:00
-
- {{hitsCtrl.values.hits}}
REUTERS: JPMorgan Chase & Co will pay a $ 1.7 billion penalty to settle charges by US federal authorities that the bank failed to report suspicious activity involving Bernard Madoff’s Ponzi scheme.
As part of the deal, which describes numerous suspicious interactions during the bank’s two-decade relationship with Madoff, JPMorgan is admitting it violated laws requiring it to monitor customer activity for money laundering in the case, authorities said on Tuesday.
The deal includes a two-year deferred prosecution agreement and settles outstanding probes by two bank regulators into failures in JPMorgan’s anti-money laundering policies. The bank also agreed to improve its controls.
“We recognise we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time,” JPMorgan spokesman Joe Evangelisti said in an email. “We filed a Suspicious Activity Report (SAR) in the UK in late October 2008, but not in the US.”
He added: “We do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme.”
As part of the deal, the bank agreed not to apply for a tax deduction or tax credit for the $ 1.7 billion payment. The $ 1.7 billion will go to the victims of Madoff’s fraud, according to Tuesday’s announcement.
JPMorgan is admitting it had failed to raise the alarm about Madoff’s activities to a bank regulator, even though bankers in more than one area of its operations had identified inconsistencies in Madoff’s behaviour and his fund’s returns.
Madoff, through his Bernard L. Madoff Investment Securities LLC hedge fund operation, was revealed in December 2008 to be the operator of a massive Ponzi scheme. Convicted in 2009 of defrauding thousands of investors, he is serving a 150-year prison sentence.
Madoff’s is the largest known Ponzi scheme in history. He kept an account at JPMorgan Chase, or banks it had bought, from 1986 until his arrest in December 2008, according to a statement of facts that the bank agreed to for public disclosure.
The account at the bank received deposits and transfers of about $150 billion, almost exclusively from investors in Madoff Securities, yet the money was not used to buy securities as Madoff had promised, according to the statement.
The balance in the account reached $ 5.6 billion in August 2008 but was down to $ 234 million when Madoff was arrested four months later.
At various times between the late 1990s and 2008, employees of various divisions of the bank “raised questions” about Madoff Securities and the validity of its investment returns. Yet “at no time during this period” did they bring their concerns to US anti-money laundering employees who were responsible for monitoring the bank’s relationships with its clients, according to the statement of facts. The bank did not file any suspicious activity reports on Madoff Securities in the United States until after Madoff’s arrest.
