JPMorgan’s Dilemma: Building a Successful Brand in Court

By Pam Martens: August 10, 2012 

Jamie Dimon, JPMorgan CEO, testifying at Senate Banking Hearing June 13, 2012

According to an SEC filing made by JPMorgan Chase yesterday, the firm is being sued by its retirees, its customers, its shareholders, the City of Baltimore, Jefferson County Alabama, the City of Milan, the trustee for Madoff’s assets, MF Global’s customers and securities holders,  the creditors of Lehman Brothers, an Enron investor and counterparty, traders in Libor and Euribor financial instruments, and on and on. 

JPMorgan’s own employees attempted to sue the firm over losses in their 401(k) plan related to Enron but according to the filing it has been dismissed: “A purported class action filed on behalf of JPMorgan Chase employees who participated in the Firm’s 401(k) plan asserting claims under ERISA for alleged breaches of fiduciary duties by JPMorgan Chase, its directors and named officers was dismissed, and the dismissal was affirmed by the United States Court of Appeals for the Second Circuit.” 

Retirees and shareholders are suing over the trading losses in the Chief Investment Office, which now total at least $5.8 billion. Customers are suing over everything from auction rate securities, alleged credit card fee collusion, interest rate swaps tied to Libor, to investment portfolios managed by JPMorgan laden with subprime mortgages. 

Two insurance companies that guaranteed the payment of principal and interest on warrants issued by Jefferson County, Alabama “have filed separate actions against the Firm in New York state court. Their complaints assert that the Firm fraudulently misled them into issuing insurance…One insurer claims that it insured an aggregate principal amount of nearly $1.2 billion and seeks unspecified damages in excess of $400 million as well as unspecified punitive damages.” 

Additionally, employees of the firm are undergoing a criminal trial in Milan, Italy in connection with derivatives JPMorgan sold to the city. 

The lawsuits and investigations in which JPMorgan is ensnarled consume eight pages of the firm’s quarterly filing (10Q) and more than 9,000 words.  Anyone reading the details would be right to question if JPMorgan is a bank or a mega legal defense fund. So far in 2012, JPMorgan has spent $3 billion on litigation.

The filing informs the reader that what was going on in JPMorgan’s Chief Investment Office is being investigated by the following: “Congress, the OCC, Federal Reserve, DOJ, SEC, CFTC, UK Financial Services Authority, the State of Massachusetts and other government agencies, including in Japan, Singapore and Germany.”  

The Federal  Energy Regulatory Commission (FERC) is investigating JPMorgan Chase regarding its bidding practices at its commodities business which has the right to output from several electricity generating facilities. 

Attempting to build a successful brand when you are either being sued or investigated on three continents is a serious headwind.  Attempting to build a successful brand when your own employees, customers and shareholders are taking you to court is impossible. 

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