JPMorgan expected to pay $2B for role in Madoff case

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by KEVIN McCOY / USA TODAY

kvue.com

Posted on January 6, 2014 at 6:39 PM

(USA TODAY) -- JPMorgan Chase is expected to pay approximately $2 billion in civil and criminal settlements as early as Tuesday to settle government suspicions that the global bank ignored signs of Bernard Madoff's massive Ponzi scheme.

The New York-based bank, where Madoff kept his main checking account for decades, will make the payments in agreements with the U.S. Attorney's office in New York, the Treasury Department and the Office of Comptroller of the Currency, The New York Times and The Wall Street Journal reported.

The bulk of the expected financial settlement is expected to go toward helping repay the thousands of ordinary investors, celebrities, charities and others burned by the $17.3 billion fraud. Only about $11.9 billion of that total has been recovered to date.

The pending settlements are expected to include a deferred-prosecution agreement that would require JPMorgan to acknowledge the findings of federal investigations and beef up the bank's internal monitoring procedures.

The financial penalties would raise the bank's total tab for settling government investigations to $20 billion during the past 12 months.

Authorities aren't likely to single out any one person at the bank for blame. But federal regulations require banks to report suspicious activity by their account holders. A recent civil suit against JPMorgan revealed e-mails that raised red flags about Madoff, including a 2008 memo that the now-disgraced financier could be running a Ponzi scheme.

That memo was written shortly before Madoff's arrest and the scam's collapse in Dec. 2008. He pleaded guilty to fraud and other charges in March 2009 without standing trial. Madoff is now serving a 150-year prison term.

Five former Madoff employees are now on trial in Manhattan federal court on charges they knowingly participated in the fraud. They have pleaded not guilty and said they were hoodwinked by their ex-boss.

Richard Cassa, a former JPMorgan client relationship manager, testified in that case last month that he previously supervised Madoff's account but had little knowledge about the investment advisory business — the business division where it turned out the fraud was secretly centered. There were "probably tens of millions" of dollars in the account during his tenure, Cassa testified.

The expected settlements won't end JPMorgan's involvement in Madoff-related legal issues. Irving Picard, the court-appointed trustee trying to recover funds from the fraud for investors, filed a U.S. Supreme Court petition last year seeking authorization to pursue financial recovery from JPMorgan and several other banks, including London-based HSBC and Swiss giant UBS.

The Supreme Court is scheduled to hold a conference on Friday in which its justices will decide whether to accept the case. Only a handful of such petitions are typically accepted for full review.

However, the Madoff trustee still has several U.S. Bankruptcy Court actions pending against JPMorgan and other banks, collectively involving an estimated $4 billion in recovery claims.

Any agreement reached between JPMorgan and the Department of Justice "would be independent" of the trustee's claims against the bank, Amanda Remus, a spokeswoman for Picard, said Monday.

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