By Pam Martens and Russ Martens: September 13, 2017
Jamie Dimon became Chief Executive Officer of JPMorgan Chase on December 31, 2005. An inordinate amount of frauds have been perpetrated inside his bank since that time, none of which the eagle-eyed Dimon spotted. But Dimon says he knows a fraud when he sees one outside of his bank. Yesterday, he took on the cryptocurrency known as Bitcoin, calling it a fraud. At a banking conference on Tuesday, Dimon said that “Bitcoin will eventually blow up. It’s a fraud. It’s worse than tulip bulbs and won’t end well.”
We’re not saying Dimon is wrong about Bitcoin. In fact, more than three years ago Wall Street On Parade compared Bitcoin to the tulip bulb bubble and explained in crystal clear terms how it differs from a real currency, such as the U.S. dollar. But we are saying that Dimon’s super sleuth nose for fraud has the uncanny knack of serially failing him when it comes to Ponzi schemes and mortgage frauds and rogue derivative and commodity traders operating inside his own bank – a taxpayer subsidized institution that has richly rewarded Dimon despite the fact that his sniffer can only catch the scent of fraud outside the doors of JPMorgan Chase. (As of June 30, 2017, according to the Federal Deposit Insurance Corporation, JPMorgan Chase held more than $1.5 trillion in deposits, the majority of which are insured by the Federal government and backstopped by the U.S. taxpayer.)
On March 22, 2016, the Government Accountability Office (GAO) released a report that noted that the U.S. Justice Department had earlier assigned a $1.7 billion forfeiture against JPMorgan Chase “for its failure to detect and report the suspicious activities of Bernard Madoff,” the largest fraud ever perpetrated against the investing public. The GAO stunningly found that because the bank “failed to maintain an effective anti-money-laundering program and report suspicious transactions in 2008, it contributed to its own bank customers “losing about $5.4 billion in Bernard Madoff’s Ponzi scheme.”
Justice Department investigative material, much of which came from Irving Picard, the trustee for the Madoff victims’ fund, showed that JPMorgan Chase had relied on unaudited financial statements and skipped the required steps of bank due diligence to make $145 million in loans to Madoff’s business. Lawyers for Picard wrote that from November 2005 through January 18, 2006, JPMorgan Chase loaned $145 million to Madoff’s business at a time when the bank was on “notice of fraudulent activity” in Madoff’s business account and when, in fact, Madoff’s business was insolvent. The JPMorgan Chase loans were needed because Madoff’s business account, referred to as the 703 account, was “reaching dangerously low levels of liquidity, and the Ponzi scheme was at risk of collapsing,” according to Picard. JPMorgan, in fact, “provided liquidity to continue the Ponzi scheme,” the Picard investigators found.
In November 2013, Picard had asked the U.S. Supreme Court to review an appellate court’s ruling that barred him from suing JPMorgan and other banks for aiding the Madoff fraud in order to recover additional funds for victims. In his Supreme Court petition, Picard stated that JPMorgan Chase stood “at the very center of Madoff’s fraud for over 20 years.” This assertion was based on Picard’s lower court filing that demonstrated that the bank was aware that Madoff was claiming to invest tens of billions of dollars in a strategy that involved buying large cap stocks in the Standard and Poor’s 500 index while simultaneously hedging with options. But the Madoff firm’s business account at JPMorgan, which the bank had access to review for over 20 years, showed no evidence of payments for stock or options trading.
Picard’s petition to the Supreme Court noted:
“As JPM [JPMorgan] was well aware, billions of dollars flowed from customers into the 703 account, without being segregated in any fashion. Billions flowed out, some to customers and others to Madoff’s friends in suspicious and repetitive round-trip transactions. But in the 22 years that JPM maintained the 703 account, there was not a single check or wire to a clearing house, securities exchange, or anyone who might be connected with the purchase of securities. All the while, JPM knew that Madoff was using the account to run an investment advisory business with thousands of customers and billions under management and knew that Madoff was using its name to lend legitimacy to his enterprise…”
According to evidence obtained by Picard, JPMorgan Chase invested over $250 million of its bank’s money with Madoff feeder funds while it simultaneously created structured investment products that allowed its customers to make leveraged bets on the returns of the feeder funds invested with Madoff.
In September 2008, just two months before Madoff confessed to running an unprecedented investment fraud, JPMorgan conducted a new round of due diligence and decided it was time to get out of its own $250 million investment with the Madoff feeder funds.
On October 28, 2008, JPMorgan Chase sent a “suspicious activity report” not to the U.S. government, the country backstopping its insured deposits and where its primary regulators were based, but to the United Kingdom’s Serious Organized Crime Agency (SOCA). The document stated:
[JPMorgan’s] “concerns around Madoff Securities are based (1) on the investment performance achieved by its funds which is so consistently and significantly ahead of its peers, year-on-year, even in the prevailing market conditions, as to appear too good to be true – meaning that it probably is; and (2) the lack of transparency around Madoff Securities’ trading techniques, the implementation of its investment strategy, and the identity of its OTC option counterparties; and (3) its unwillingness to provide helpful information. As a result, JPMCB has sent out redemption notices in respect of one fund, and is preparing similar notices for two more funds.”
In addition to paying the forfeiture of $1.7 billion to the Justice Department, JPMorgan Chase was charged by the agency with two criminal felony counts and given a deferred prosecution agreement. It said it would do much better in the future. But the very next year, on May 20, 2015, JPMorgan Chase was charged with a new felony count, which it admitted to, for involvement in rigging foreign currency markets. Other banks were charged as well.
The crime spree at JPMorgan Chase became so prolific that two trial lawyers, Helen Davis Chaitman and Lance Gotthoffer, published a breathtaking book on the matter, noting the similarities to the Gambino crime family. In addition to the above frauds, the authors add more details as to what has occurred on Dimon’s watch, such as:
“In April 2011, JPMC agreed to pay $35 million to settle claims that it overcharged members of the military service on their mortgages in violation of the Service Members Civil Relief Act and the Housing and Economic Recovery Act of 2008.
“In March 2012, JPMC paid the government $659 million to settle charges that it charged veterans hidden fees in mortgage refinancing transactions.
“In October 2012, JPMC paid $1.2 billion to settle claims that it, along with other banks, conspired to set the price of credit and debit card interchange fees.
“On January 7, 2013, JPMC announced that it had agreed to a settlement with the Office of the Controller of the Currency (‘OCC’) and the Federal Reserve Bank of charges that it had engaged in improper foreclosure practices.
“In September 2013, JPMC agreed to pay $80 million in fines and $309 million in refunds to customers whom the bank billed for credit monitoring services that the bank never provided.
“On November 15, 2013, JPMC announced that it had agreed to pay $4.5 billion to settle claims that it defrauded investors in mortgage-backed securities in the time period between 2005 and 2008.
“On December 13, 2013, JPMC agreed to pay 79.9 million Euros to settle claims of the European Commission relating to illegal rigging of benchmark interest rates.
“In February 2012, JPMC agreed to pay $110 million to settle claims that it overcharged customers for overdraft fees.
“In November 2012, JPMC paid $296,900,000 to the SEC to settle claims that it misstated information about the delinquency status of its mortgage portfolio.
“In July 2013, JPMC paid $410 million to the Federal Energy Regulatory Commission to settle claims of bidding manipulation of California and Midwest electricity markets.
“On November 19, 2013, JPMC agreed to pay $13 billion [that’s billion with a ‘b’] to settle claims by the Department of Justice; the FDIC; the Federal Housing Finance Agency; the states of California, Delaware, Illinois, Massachusetts, and New York; and consumers relating to fraudulent practices with respect to mortgage-backed securities.
“In December 2013, JPMC paid $22.1 million to settle claims that the bank imposed expensive and unnecessary flood insurance on homeowners whose mortgages the bank serviced.”
Not only has Jamie Dimon not been fired from his position as Chairman and CEO of JPMorgan Chase after presiding over this unprecedented wave of charges but he’s now dually serving as the Chairman of the Business Roundtable, a national organization of corporate CEOs whose stated goal is to “build a better future for the nation and its people.”