Department of Justice Has Six Ongoing Investigations of JPMorgan

By Pam Martens: August 8, 2013 

Jamie Dimon Testifying at Senate Banking Hearing June 13, 2012

If a major Wall Street firm is being investigated by the Securities and Exchange Commission (SEC), that’s one thing. The SEC has no criminal powers to prosecute. And when it comes to Wall Street mega banks, there is a long tradition of fines and slaps on the wrist rather than prosecutions. 

But when there is an open investigation by the Department of Justice, which does possess the power to criminally prosecute, there should be concern in the marketplace, if for no other reason than the fact that there is significant public attention being paid to the DOJ’s failure to prosecute big Wall Street firms. 

Yesterday, JPMorgan Chase filed its quarterly 10Q with the SEC. If ever there was a document making a convincing case for breaking up the big banks and restoring the Glass-Steagall Act, this is it. 

JPMorgan reported it is under investigation by the Justice Department in six separate areas; being pursued by multiple state attorneys general; Congress; at least five federal agencies; regulators around the world including the European Commission, the UK’s Financial Conduct Authority, the Canadian Competition Bureau, and the Swiss Competition Commission. In addition, in a trial in Italy, two of its employees were “found guilty of aggravated fraud with sanctions of prison sentences, fines and a ban from dealing with Italian public bodies for one year.” In the same matter, JPMorgan was fined €1 million and ordered to forfeit profit from the transaction of €24.7 million. (Both the individuals and JPMorgan are appealing the decision.) 

According to the SEC filing, the Justice Department is investigating the following at JPMorgan: 

Mortgage Backed Securities Offerings (MBS): “The Firm is responding to parallel investigations being conducted by the Civil and Criminal Divisions of the United States Attorney’s Office for the Eastern District of California relating to MBS offerings securitized and sold by the Firm and its subsidiaries. In May 2013, the Firm received a notice from Civil Division stating that it has preliminarily concluded that the Firm violated certain federal securities laws in connection with its subprime and Alt-A residential MBS offerings during 2005 to 2007.” 

Communications With Counterparties In Connection With Certain Mortgage-Backed Securities Transactions: Requests for information have come from the Justice Department’s U.S. Attorney’s Office for the District of Connecticut. 

Federal Housing Administration (FHA) Direct Endorsement Program: JPMorgan is under investigation by the U.S. Attorney’s Office for the Southern District of New York. 

LIBOR: JPMorgan says the Justice Department is one of the multiple bodies investigating its potential role in rigging the interest rate benchmark used to set the interest rate on trillions of dollars of loans and derivatives around the world. 

London Whale and Chief Investment Office: Congress, the Justice Department and multiple federal agencies are investigating JPMorgan’s conduct. 

Madoff: JPMorgan’s filing says the Firm is responding to various governmental investigations relating to Madoff, including by the Department of Justice and other regulators. 

JPMorgan also said in the filing that losses from its legal proceedings, in excess of the reserves it has already established, could reach $6.8 billion according to its estimate on June 30, 2013. As Wall Street on Parade reported in November of last year, JPMorgan paid in excess of $16 billion in litigation expenses in a 33-month period from January 2010 through the third quarter of 2012. 

The Department of Justice is far from JPMorgan’s only legal concern. Its SEC filing lists nine pages of lawsuits and investigations that are ongoing, including “A request for information from the New York State Department of Financial Services relating to forbearance practices for loans serviced by the Firm that are secured by residential property in Superstorm Sandy FEMA-designated counties in New York State.”

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