How High Up Did the London Whale Criminality Go at JPMorgan?

By Pam Martens and Russ Martens: October 22, 2014 

JPMorgan BuildingYesterday the Inspector General of the Federal Reserve System released a highly abbreviated report on the New York Fed’s supervision of JPMorgan’s Chief Investment Office (CIO) that spawned the $6.2 billion in exotic derivative losses in 2012 – using hundreds of billions of dollars in FDIC insured deposits to make those wild bets. The debacle became known as the London Whale since the outsized trades were conducted in London.

The four page summary report that was sanitized for the public includes two bombshells for those who took the time to read the report carefully. First, the Inspector General specifically notes that “we selected July 2004 through April 2012 as the time period for our evaluation. July 2004 marked JPMC’s merger with Bank One Corporation (Bank One), and JPMC created the CIO in 2005.”

What is the relevance of that nugget? We learn for the first time that no Chief Investment Office existed at JPMorgan until after the Bank One merger which brought Jamie Dimon on board JPMorgan for the first time. Dimon was CEO of Bank One at the time of the merger in 2004. The deal included the terms that Dimon would immediately become President and Chief Operating Officer of the combined firms and step into the role as CEO in 2006.

Next we are told by the Inspector General that New York Fed staff recommended no less than three examinations of the Chief Investment Office – in 2008, 2009 and 2010. But the examinations just never came to fruition.

The report offers three extremely wussy explanations for why there was no comprehensive review of what was going on in the Chief Investment Office by the New York Fed: “FRB New York did not conduct the planned or recommended examinations because (1) the Reserve Bank reassessed the prioritization of the initially planned activities related to the CIO due to many supervisory demands and a lack of supervisory resources, (2) weaknesses existed in controls surrounding the supervisory planning process, and (3) the 2011 reorganization of the supervisory team at JPMC resulted in a significant loss of institutional knowledge regarding the CIO.”

Pure poppycock. We can think of a far more realistic explanation for why no meddling into high risk trading at JPMorgan using depositors’ savings was ever conducted in 2008 through 2010: Jamie Dimon sat on the Board of Directors of the New York Fed – his bank’s regulator –  from 2007 through 2012.

And while all of this was happening, William Dudley was serving as the President and CEO of the New York Fed while his wife, Ann Darby, a former Vice President at JPMorgan, was receiving approximately $190,000 per year in deferred compensation from JPMorgan – an amount she is slated to receive until 2021 according to financial disclosure forms.

Senator Carl Levin has previously hinted that skullduggery went back a number of years in the Chief Investment Office at JPMorgan. When Senator Levin appeared on May 13, 2012 on Meet the Press, host David Gregory asked Levin what should be the price for what occurred at JPMorgan.  Levin said:

“In terms of past activities, that’s in the hands of people who are assessing whether there was any criminal wrongdoing.  That’s still in the hands, as far as I know, of the Justice Department and the New York prosecutors.”

Those “past activities” were apparently enough to trigger a criminal investigation by the FBI. Three days after Senator Levin appeared on Meet the Press, the Senate Judiciary Committee took testimony from FBI Director Robert Mueller on unrelated matters. Senator Richard Blumenthal decided to inquire into the JPMorgan investigation. (Blumenthal was previously Connecticut’s Attorney General for five terms as well as a former U.S. Attorney for the Justice Department.)

The exchange went as follows:

Senator Blumenthal: “I would like to ask first about the JPMorgan Chase investigation. Can you tell us what potential crimes could be under investigation, without asking you to conclude anything or talk about the evidence. Would  it be false statements to the Federal government or what area of criminal activity?”

FBI Director Mueller: “I’m hesitant to say anything other than what is available under Title 18 or available to the SEC would be the focus of any ongoing investigation.”

Senator Blumenthal: “Can you talk at all about the timing of that investigation?”

FBI Director Mueller: “All I can say is we’ve opened a preliminary investigation and, as you would well know, having been in this business for a long time, it depends on a number of factors.”

Senator Blumenthal: “And, I’m not going to press you further but I would just encourage you – without your needing any encouragement I’m sure – to press forward as promptly and aggressively and expeditiously as possible because I think that the American public really has lost faith in many other enforcement agencies partly because of the delay and lack of results and I think that the FBI’s involvement is a very constructive and important presence in this area.”

Other than bringing criminal charges against two traders for lying about losses on the London Whale trades – traders whom the Justice Department cannot seem to extradite to this country for trial – none of the higher ups at JPMorgan involved in approving these trades or using insured deposits to make them have been charged.

Now, coming on the heels of the recent exposure of the Carmen Segarra tapes showing how the New York Fed tiptoes around its Wall Street charges, the Inspector General’s revelation that three recommended examinations of JPMorgan’s high risk Chief Investment Office were never conducted, simply adds to the public disgust and assessment that Wall Street operates outside the law with a wink and a nod from its regulators.

IBM Has to Pay a Foreign Government $1.5 Billion to Unload a Business?

By Pam Martens and Russ Martens: October 21, 2014

IBM Stock ChartIn 30 years of observing Wall Street, we can’t remember a headline like the one that appeared yesterday at Reuters: “IBM to Pay GlobalFoundries $1.5 Billion to Take Chip Unit.” When one can’t even give a business away that includes thousands of patents, IBM engineers and two operating factories, times are tough. The market thought so also; by the closing bell yesterday, IBM’s stock was down $12.95, or 7 percent, to $169.10.

The acquirer of the IBM semiconductor business, GlobalFoundries, is headquartered in Silicon Valley. Its parent is Advanced Technology Investment Company (ATIC), which is owned by the Abu Dhabi government’s investment arm, Mubadala Development Company. In May, ATIC announced it was changing its name to Mubadala Technology.

Abu Dhabi likely drove a very hard bargain with IBM in this deal because it has good reason to question promises made by American businessmen. As we reported in 2012, Abu Dhabi’s sovereign wealth fund, ADIA, previously leveled a $4 billion fraud charge against Citigroup for taking it to the cleaners in a stock deal. That deal began with a hand shake from none other than former U.S. Treasury Secretary, Robert Rubin, who was serving as Citigroup’s interim Chairman at the time.

The two manufacturing facilities that come with the IBM deal are located in East Fishkill, New York and Essex Junction, Vermont. The $1.5 billion that IBM will pay GlobalFoundries will be spread over three years and is likely to help defray costs of facility upgrades. IBM has also agreed to a 10-year deal in which GlobalFoundries will be its exclusive provider of certain chipsets.

The trajectory of IBM’s stock price and its writeoffs are starting to bring back memories of the bad hand it dealt investors in the 90s. The stock is down from a price of more than $190 in September. Yesterday, in addition to the curious “pay-to-sell” deal, IBM also announced it was taking a $4.7 billion pre-tax charge in its third quarter and reported a 4 percent drop in revenues.

Over its more than a century of operations, IBM has repeatedly reinvented itself. That reinvention, however, has meant that investors have had long spells of dead money. The worst episode in IBM’s business history came in January 1993. The company announced it had lost $5 billion in 1992 and that it would slash its dividend to 54 cents from $1.21. Its stock had declined from $120 a share in 1990 to $48 and change at the time of the announcement.

Lou Gerstner was brought in from RJR Nabisco Holdings to replace longtime Chairman John Akers. The transition was not without pain. By the second quarter of 1993, IBM reported an additional $8 billion loss and announced it would be sacking tens of thousands of workers. The dividend was cut again, this time in half.

The 1990s reinvention of IBM has had a dramatic, negative impact on the long term total return of its stock and the wealth building capability of its long-term shareholders.

We decided to compare the performance of a cyclical computer company like IBM on a total return basis (share price appreciation plus dividend reinvested) from July 28, 1980 to October 17, 2014 versus the same period for Procter and Gamble, a household products company famous for iconic brands like Crest toothpaste and Ivory soap. We used the calculators available on the web sites of IBM and Procter and Gamble to make the calculations.

IBM delivered a total return of 1,460.62 percent over the period versus 3,104.82 percent for Procter and Gamble.

Janet Yellen: Average Net Worth of 62 Million U.S. Households is $11,000

By Pam Martens and Russ Martens: October 20, 2014 

Janet Yellen, Federal Reserve Chair

Janet Yellen, Federal Reserve Chair

It took 200 years of hard data in a bestselling book by Thomas Piketty, awesome graphs and charts in Robert Reich’s documentary, “Inequality for All,” and years of scolding from Wall Street on Parade, but Fed Chair Janet Yellen has finally, and correctly, arrived at the idea that the nation’s economic ills are deeply rooted in the fact that U.S. “income and wealth inequality are near their highest levels in the past hundred years.” That was the message Yellen delivered on Friday in a speech at the Federal Reserve Bank of Boston, replete with stomach-churning figures from the Fed.

Make no mistake about it, coming at the end of a week that saw dramatic up and down spikes in the stock market – Yellen was sending a pivotal message to the Wall Street wealth hoarders – your billionaire standing could be as ephemeral as a day lily if we don’t fix this income and wealth gap.

Yellen quieted the crowd with this opener: “The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.” Using data from the Fed’s Survey of Consumer Finances, Yellen punctuated her message with these hair-raising figures:

“The wealthiest 5 percent of American households held 54 percent of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013;

“The lower half of households by wealth, held just 3 percent of wealth in 1989 and only 1 percent in 2013. To put that in perspective…the average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013.”

“This $11,000 average is 50 percent lower than the average wealth of the lower half of families in 1989, adjusted for inflation.”

A “major source of wealth for many families is financial assets, including stocks, bonds, mutual funds, and private pensions…the wealthiest 5 percent of households held nearly two-thirds of all such assets in 2013…”

Franklin D. Roosevelt, President During the Great Depression

Franklin D. Roosevelt, President During the Great Depression

Unfortunately, being the head of a Federal Reserve system that relies on goodwill with the big Wall Street firms to carry out its open market operations, Fed Chair Yellen apparently felt it would be impolitic to mention that this vast wealth inequality is coming from an institutionalized wealth transfer machine operated by Wall Street and supervised by a Fed that is regularly reviled for its wussiness when it comes to cracking down on blatant corruption by its charges.

What is particularly noteworthy is that Yellen specifically references the Great Depression but does not seem to comprehend where the slack in the U.S. economy is coming from. Franklin Delano Roosevelt, running for President in 1932, had no such difficulties.

In a speech at Oglethorpe University in Atlanta on May 22, 1932, in the midst of the Great Depression, Roosevelt made the following remarks:

“raw materials stand unused, factories stand idle, railroad traffic continues to dwindle, merchants sell less and less, while millions of able-bodied men and women, in dire need, are clamoring for the opportunity to work…

“our basic trouble was not an insufficiency of capital. It was an insufficient distribution of buying power coupled with an over-sufficient speculation in production. While wages rose in many of our industries, they did not as a whole rise proportionately to the reward to capital, and at the same time the purchasing power of other great groups of our population was permitted to shrink…

“Do what we may have to do to inject life into our ailing economic order, we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income…

“It is well within the inventive capacity of man, who has built up this great social and economic machine capable of satisfying the wants of all, to insure that all who are willing and able to work receive from it at least the necessities of life. In such a system, the reward for a day’s work will have to be greater, on the average, than it has been, and the reward to capital, especially capital which is speculative, will have to be less.”

Until Fed Chair Yellen is prepared to do more than give lip service to income and wealth inequality, her command over monetary policy will be sorely challenged.

Hedge Funds Get Pummeled: Shades of Long-Term Capital Management L.P.

By Pam Martens and Russ Martens: October 16, 2014

Dow -458If you happened to be sitting behind a trading screen on Wall Street in late August and September 1998, you’ve likely been having some déjà vu over the past seven trading sessions. Intraday rallies continue to fail; there is a thundering stampede into Treasuries; rumors are buzzing about hedge funds in trouble; waves of selling pressure suggest wholesale dumping to meet margin calls.

If you needed any more evidence that there is some serious stuff going on behind the scenes on Wall Street, you got it in yesterday’s stock market open. Within minutes the Dow Jones Industrial Average had plunged 370 points in a panic selling spree as buyers went on strike. The Dow was down as much as 458 points in early afternoon before trimming its loses before the final bell to close at a minus 173 points.

It’s all so reminiscent of late August and September 1998 when the five year old hedge fund Long-Term Capital Management L.P., replete with two Nobel laureates on board feeding exotic mathematical formulas into computers, had levered up to the eyeballs in reversion-to-the-mean bets using massive amounts of money borrowed from the major firms on Wall Street. The reversion-to-the-mean thesis was based on the idea that the widened yield spread between risky securities and safer ones would narrow, i.e., revert to the mean.

This was all in the thick of the currency and debt crisis in Russia which dictated, through plain ole common sense, that as that crisis worsened spreads would widen further, not shrink. Which is exactly what they did, causing Long-Term Capital to become Short-Term Capital. The New York Fed had to sit the Wall Street big boys down in its conference room and get agreement on a multi-bank bailout of the teetering hedge fund.

Flash forward to today. U.S. hedge funds have invested billions of dollars in the stock of Dublin-based drugmaker Shire on speculation that U.S. drugmaker, AbbVie, would consummate its buyout of the company, delivering hefty profits to the hedge funds. But the trades have gone seriously awry with Shire losing 29 percent of its value over the past two days on speculation the deal is in trouble.

Early this morning, Reuters has confirmed the hedge funds’ worst nightmare with news that AbbVie “has pulled the plug on its plan to buy Dublin-based Shire, recommending shareholders vote against the proposed $55 billion takeover…”

On top of this harbinger of margin calls are concerns that some hedge funds have made wrong-way bets on the direction of interest rates – putting leveraged money on speculations that rates would rise while now watching them plumb historic record lows around the globe amid rising concerns that we are seeing slowing growth and deflationary forces at work.

There are further reports that hedge funds have suffered additional losses from bets on Fannie Mae and Freddie Mac securities which were delivered a blow in late September when a Federal judge dismissed a lawsuit that would have required the U.S. government, which had to take over the failed firms during the 2008 financial crisis, to share the companies’ profits with shareholders.

Hedge funds are also known to make large, leveraged bets in the oil futures markets and Saudi Arabia’s gambit to effectively launch an oil price war, driving down crude oil prices to four year lows, has caught many oil speculators flat-footed.

Yesterday, Hall Commodities LLP, a hedge fund which manages approximately $100 million in oils and metals, was reported to be shuttering its doors due to poor performance. The largest hedge funds, by comparison, manage billions of dollars, not millions.

Yesterday, Nathan Vardi of Forbes reported that John Paulson’s hedge funds are the second-biggest shareholders of Shire stock, whose price decline “comes at a particularly bad time for Paulson. His main hedge funds performed poorly in September and are down for the year. For example, Paulson’s Advantage Plus Fund fell by about 11% in September and is now down 14% this year. His Advantage Fund was down 13% in the first nine months of the year and his Recovery Fund had lost 6% for the year.” Typically, such performance data is quite stale by the time it gets into the public’s hands.

John Paulson, Hedge Fund Manager, Is Praised in the 2010 Spring/Summer Issue of the Alumni Magazine of the Stern School of Business

John Paulson, Hedge Fund Manager, Is Praised in the 2010 Spring/Summer Issue of the Alumni Magazine of the Stern School of Business at NYU

Paulson is that infamous character who helped Goldman Sachs construct the 2007 ABACUS deal, designed to fail so he could make $1 billion betting that it would fail while Goldman Sachs sold it to its clients as a good investment. On April 16, 2010, the SEC had this to say in assessing Paulson’s business morals: “The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.”

According to the SEC’s complaint, by October 2007, 83 percent of the bonds in the portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded. The SEC estimated that investors lost more than $1 billion in the deal.

Goldman got off the hook by paying $550 million to settle the charges in 2010. Fabrice Tourre, the young Goldman investment banker and scapegoat involved in the deal, was tried in a civil court case by the SEC and found liable in March of this year for defrauding investors. Tourre paid $825,000 in fines.

Paulson was never charged. Around the time of the allegations, Paulson donated $20 million to NYU and got his name enshrined on the auditorium of its business school – delivering the sickening message to the next generation of business leaders that it’s legal if you can get away with it.

New Book: Senator Schumer Was Regular Visitor to Madoff Offices

By Pam Martens and Russ Martens: October 15, 2014 

Senator Chuck Schumer at a Senate Hearing Last Month

Senator Chuck Schumer at a Senate Hearing Last Month

New York City has 8.4 million people living in its boroughs. But when it comes to defending those charged with financial crimes, it’s a very small, clubby world of people who are either related to each other or have worked together in the past. And this clubby group has one more thing in common: most of its members seem to be lavishing huge campaign contributions on U.S. Senator Charles (Chuck) Schumer of New York – a man who is in a position to recommend Federal Judge appointments and the Justice Department’s U.S. Attorney who will prosecute the financial crimes – or not.

These are the findings in a new on-line book, JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook, being offered free as a chapter a month by attorneys Helen Davis Chaitman and Lance Gotthoffer. (Chaitman is a nationally recognized litigator who was swindled by Madoff and is passionate about getting an unabridged recital of facts out to the public, including details about the extensive involvement in the fraud by the big Wall Street bank, JPMorgan Chase, and Madoff clients that the authors believe to have been co-conspirators.)

Chapter 3 is now up on the web site and delivers this nugget: “Senator Schumer was a frequent visitor to Madoff in his office in New York’s Lipstick Building.” This information came to Chaitman in 2009 from Madoff employees and is confirmed by a 2014 interview with Madoff himself by Politico’s MJ Lee, indicating that Schumer paid personal visits to Madoff  to collect campaign contributions.

In the March Politico article, Lee adds this: “Approached in a Senate hallway last week, Schumer seemed willing to talk to a reporter — until the subject of Madoff came up. ‘I’m not commenting,’ the New York Democrat said as he walked away. ‘I am not commenting.’ ”

The web of relationships unveiled in the book include the following:

The U.S. Attorney for the Southern District of New York, Preet Bharara, who agreed to a deferred prosecution agreement against JPMorgan Chase for their involvement in the Madoff fraud and who allowed the family of Madoff client Jeffry Picower to keep billions of dollars that very likely grew out of the fraud, was Senator Schumer’s former Chief Counsel and recommended for the prosecutor’s post in 2009 by Senator Schumer.

The lawyer who represented the Picower family and estate with the U.S. Attorney’s office, William Zabel of Schulte Roth & Zabel had also served on the Board of the Jeffry M. & Barbara Picower Foundation which was a major beneficiary of Madoff’s crimes, according to the Trustee of the Madoff victims’ fund, Irving Picard. While William Zabel was representing the Picower estate, his son, Richard Zabel, was the Chief of the Criminal Division of the U.S. Attorney’s office in the Southern District of New York, working under Preet Bharara. (Richard Zabel recused himself from the matter.) Richard Zabel has since received a promotion and is now the Deputy U.S. Attorney for the Southern District of New York.

Employees of Schulte Roth & Zabel have consistently been in the top ranks of donors to Senator Schumer, with cumulative contributions of $200,100 for all years, putting them in the league with Wall Street legal powerhouses like Sullivan and Cromwell’s donations to the Senator.

There is no question that Jeffry Picower and his family were the largest beneficiaries of the Madoff fraud; they admitted as much by returning the full amount that had been withdrawn from their accounts: $7.2 billion (with a “b”). The authors have this to say in that regard:

“Picower realized a net gain of $7.2 billion from his complicity with Madoff over a 25-year period. Although the Madoff Trustee has not revealed the information as to the precise dates on which Picower withdrew funds from Madoff, if we assume that the funds were drawn out evenly over 25 years, and we assume that Picower had simply invested his stolen money in U.S. Treasury Notes over a 25-year period, he would have tripled his money – giving him a profit from Madoff’s crimes of approximately $21 billion. Again, that’s assuming he did nothing with his money but invest in U.S. Treasury Notes.”

The authors have a point. A basic tenet of Investing 101 is that there is a time value to money. For the U.S. Attorney’s office and the Madoff trustee to have allowed the Picowers to keep the investment gains earned on the stolen funds is suspect, especially given the additional facts in the case.

In his original lawsuit against Picower, the Madoff trustee, Irving Picard, had alleged the following from the detailed records he had obtained from the Madoff offices and warehouse:

“Among other reasons, Defendants [Picower entities] knew or should have known that they were profiting from fraud because of the implausibly high rates of return that their accounts supposedly achieved…In several cases, Defendants’ purported annual rates of return were more than 100%, with some annual returns as high as 500% or even 950% per year…

“On information and belief, [April] Freilich’s conduct alleged herein was undertaken as the agent of Picower…and on information and belief, at least certain of Freilich’s conduct alleged herein was at Picower’s express direction.

“Picower and the other Defendants knew or should have known that fictitious and backdated trading activity was being reported in their accounts, and that their accounts reflected fictitious holdings.  For example, Decisions [a Picower business account] maintained several accounts with BLMIS [Bernard L. Madoff Investment Securities].  One of those accounts, ‘Decisions Inc.,’ was used by Picower and the other Defendants as the primary source of cash withdrawals from BLMIS.  The account reflected little trading activity and relatively few holdings, but Picower directed quarterly distributions from this account in the millions to hundreds of millions of dollars throughout the 1990s and 2000s. Indeed, as of the date of Madoff’s arrest, the account had a reported negative net cash balance of more than $6 billion. Most distribution requests were signed by Picower and faxed to BLMIS by Freilich, although some were signed by Freilich and in other cases Picower directed that any questions should be addressed to ‘April’ [Freilich].

“Even more brazenly, one account combined outrageous returns with backdating to create trades that ‘occurred’ before the account was even opened by BLMIS. On or about April 24, 2006, Decisions opened a sixth account with BLMIS (‘Decisions 6’) by wire transfer on April 18 of $125 million.  BLMIS promptly began ‘purchasing’ securities in the account, but it backdated the vast majority of these purported transactions to January 2006.  By the end of April, a scant 12 days later, the purported net equity value of the account was over $164 million, a gain of $39 million, or a return of more than 30% in less than two weeks of purported trading…

“On May 18, 2007, Freilich indicated the Foundation needed ‘$20 mil in Gains’ for January and February and ‘want[ed] 18% for year 07 appreciation,’ but that she had to check the numbers ‘with Jeff.’  On information and belief, ‘Jeff’ is Defendant Jeffry Picower.  Five days later, on May 23, Freilich told BLMIS that the numbers she had provided earlier were wrong, and the Foundation ‘needs only $12.3 mil [in gains] for’ January and February 2007. Accordingly, the Picower Foundation’s May 2007 statement reflected millions of dollars in securities transactions for the months of January and February 2007 that collectively resulted in a purported gain to the account of $12.6 million.  These transactions had not appeared on the January or February 2007 statements, nor on any prior monthly customer statements that had been generated before May 2007, nor were the corresponding equity positions or values reflected on those earlier statements…

“On or around December 29, 2005, April Freilich, acting on behalf of Picower, faxed to BLMIS a letter signed by Picower that directed BLMIS to ‘pick up long term capital gains in the accounts listed below before December 31, 2005’ across five Decisions accounts…Upon Picower’s instruction, BLMIS ‘sold’ Agilent Technologies (‘Agilent’) and Intel Corporation (‘Intel’)  across these accounts, realizing a long-term gain of approximately $46.3 million, a significant majority of the requested gain. According to the account statements generated by BLMIS for December 2005 – and forwarded to Picower and his agents – these trades purportedly settled around December 8 and 9, 2005, approximately 3 weeks before the relevant instruction was sent to BLMIS. Picower’s failure to question BLMIS’ apparent clairvoyance suggests that Picower knew that BLMIS was backdating trades.”

Less than a year and a half after Picard filed his lawsuit against Picower, the billionaire died of a heart attack while swimming in his Palm Beach pool. Freilich was never charged.

Zabel’s law firm, Schulte Roth & Zabel, bragged of the cool deal they had crafted for the Picowers as follows in their 2010 – 2011 Annual Report:

“It took a concerted effort among SRZ attorneys with diverse specialties to arrive at this historic result. The representation was led by partners from Individual Client Services and Litigation who were assisted by attorneys from Business Reorganization, Tax and Business Transactions. In announcing the settlement, Madoff trustee, Irving Picard, said, ‘When we filed suit against Mr. Picower and others in the spring of 2009, the records available led us to allege that Mr. Picower might have or should have known of Mr. Madoff’s fraud. With the benefit of additional records, I have determined that there is no basis to pursue the complaint against Mr. Picower, and we have arrived at a business solution instead.’ ”

In Wall Street’s New York, “business solutions” are so much tidier than justice.

On September 9 of this year, Nathan Vardi, writing for Forbes, reported that “Barbara Picower, the widow of the biggest beneficiary of the Bernard Madoff Ponzi scheme, has resumed her role as one of the nation’s top philanthropists, heading a new foundation with more than $2 billion in assets.”

The new entity is called the JPB Foundation. According to Vardi, April Freilich, who was listed to receive $13.5 million in Picower’s will, is the Treasurer of the new foundation. William Zabel is one of the Trustees.