By Pam Martens: May 18, 2012
On May 16, the U.S. Senate Judiciary Committee convened a hearing on “Oversight of the Federal Bureau of Investigation.” The hearing came less than a week after JPMorgan Chase announced it had lost at least $2 billion of insured deposits in a so-called hedging strategy it has yet to define. (According to media reports today, that loss is now dramatically larger.)
Senator Richard Blumenthal at Senate Judiciary Hearing
Senator Richard Blumenthal is a member of the Judiciary Committee with an impressive resume as a former prosecutor, serving five terms as Connecticut’s Attorney General as well as a former U.S. Attorney for Connecticut.
When Senator Blumenthal’s turn came to question FBI Director Robert Mueller, the dialogue 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.”
The reference to Title 18 of the U.S. Code by FBI Director Mueller is the law governing a broad cross section of crimes and criminal procedure. It includes false statements to Federal investigators.
What might have been behind Senator Blumenthal’s thinking when he specifically asked about false statements?
There are a number of red flags and they all center around Jamie Dimon, Chairman and CEO of JPMorgan Chase. On a conference call with Wall Street analysts on April 13 to discuss JPMorgan’s first quarter earnings, Dimon and CFO Douglas Braunstein made an upbeat assessment of where the firm stood in terms of revenues, profits and risk management. Dimon dominated the answer and question part of the call. There is now growing suspicion that Dimon intentionally withheld information about losses.
FBI Director Robert Mueller at Senate Judiciary Hearing
Because of the swift action by the FBI to open a preliminary investigation, and take the unusual step of acknowledging the fact, there may be a current or former employee of JPMorgan acting as a whistleblower and providing a solid evidentiary base for the investigation. If Dimon is aware of the whistleblower’s existence, that would explain why he held an unexpected conference call on short notice with analysts on May 10 to alert them to the mind numbing losses of depositor funds.
Regulators have briefed the Senate Banking committee and it did not like what it heard. Dimon will be testifying before that committee at some point within the next few weeks.
——————————————————————
JPMorgan to Return Some MF Global Customer Funds
News Update: The Trustee, James Giddens, representing customers in the MF Global missing customer funds debacle has obtained $168 million of the funds JPMorgan improperly held, according to a statement his office issued this afternoon. That amount constitutes just a portion of what the Trustee says JPMorgan is improperly holding that rightfully belongs to customers. Negotiations continue for the balance.
Now that the FBI is nosing around JPMorgan, maybe Jamie Dimon will decide that hanging on to illegally obtained customer funds is not worth the risk of yet another FBI probe.
