By Pam Martens and Russ Martens: June 30, 2014
A man with a long history of keeping big bank secrets safe from the public’s prying eyes has denied the appeal filed by Wall Street On Parade to obtain specifics about the worker deaths upon which JPMorgan Chase pockets the life insurance money each year.
According to its financial filings, as of December 31, 2013, JPMorgan held $17.9 billion in Bank-Owned Life Insurance (BOLI) assets, a dark corner of the insurance market that allows banks to take out life insurance policies on their workers, secretly pocket the death benefits, and receive generous tax perks subsidized by the U.S. taxpayer. According to experts, JPMorgan could potentially hold upwards of $179 billion of life insurance in force on its current and former workers, based on the size of its BOLI assets.
The man who denied Wall Street On Parade’s appeal is Daniel P. Stipano, who told us by letter on June 20, 2014 that he had 450 pages of responsive material but it was not going to be released to us or the public. (See OCC Response to Appeal from Wall Street On Parade Re JPMorgan Banker Death Bets.)
Stipano is, by title, the Deputy Chief Counsel of the Office of the Comptroller of the Currency (OCC), the U.S. regulator of national banks, including those that were at the center of the 2008 financial collapse, mortgage and foreclosure frauds, and which continue to violate the nation’s laws with regularity. According to Stipano’s current bio, he also functions as the supervisor of the OCC’s Enforcement and Compliance, Litigation, Community and Consumer Law, and Administrative and Internal Law Divisions. That’s a lot of hats for one man to wear at a regulator of serially malfeasant mega banks.
Stipano also appears to be the decider-in-chief when it comes to Freedom of Information Act (FOIA) requests to the OCC. He also functions as a key decision maker when it comes to denying documents to U.S. Senators to allow them to perform their oversight duties. (One would certainly think that a Federal regulator would establish an independent office to handle FOIA and Congressional information requests.)
Stipano is the man who played an outsized hand in the scandalous structure of the “Independent Foreclosure Review,” where the major Wall Street banks who had illegally foreclosed on families were allowed to hire their favorite, deeply conflicted consultants to review the foreclosure files for wrongdoing, set the terms of the consulting contracts and pay out $2 billion to the consultants before homeowners had received a dime — and a year had been wasted on bogus reviews.
The end result of that hubris, as Senator Elizabeth Warren revealed last year, was that the actual banks engaged in the illegal foreclosure activities, not the so-called Independent Foreclosure Review consultants, were allowed by the OCC to tally up and classify their own wrongdoing.
One of the “independent” consultants that the OCC rubber-stamped for hire by the banks was Promontory Financial Group. As Wall Street On Parade reported in April of last year:
“In the engagement letter dated September 6, 2011 between Bank of America and Promontory Financial Group, the ‘independent’ consultant it hired to conduct its foreclosure investigation, Promontory attested to regulators that: ‘Promontory does not have an ongoing relationship with BAC [Bank of America], nor does it act in any advocacy capacity on its behalf.’
“The veracity of that statement is severely undercut by public records. While it was denying any ongoing relationship to regulators, Promontory actually had a large scale re-branding and turnaround contract with Bank of America that had been in place since May of 2011, four months prior to its engagement letter to conduct a government investigation into the bank’s foreclosure abuses.”
There were two other interesting facts about Promontory: Stipano’s two former bosses were employed there: Eugene Ludwig, former head of the OCC and Julie Williams, former Chief Counsel at the OCC. Of the estimated $2 billion paid out to the “independent” consultants, Promontory received $928 million.
On April 11, 2013, Senator Elizabeth Warren had this to say to Stipano and a representative from the Federal Reserve at a Senate hearing on the Independent Foreclosure Review:
“Over the last few months, Congressman Elijah Cummings and I have requested documents from your agencies regarding the basic data and the processes of the Independent Foreclosure Review. We made 14 specific requests to you in January, and despite multiple letters back and forth and multiple meetings, you have provided only one full response, three partial or minimal responses, and no response to nine of our requests. You have provided little specific information on what the review actually found, such as the number of improper foreclosures, the amount and number of inflated fees, or the extent of abusive practices by each of the mortgage servicers.”
During the course of the hearing, Senator Warren became so frustrated with Stipano’s insistence that illegal activities of banks, if ferreted out by bank examiners, was subject to “privilege,” that she blurted out: “So unless someone throws a rock through the window with this information tied to it, you will not release it, is that what you are saying?”
Wall Street On Parade received the same fundamentally flawed logic in Stipano’s letter of June 20, 2014. Stipano writes:
“The OCC has no responsive records pertaining to the number of employees insured by JPMC under BOLI policies, the face amount of the policies, the rank of employees who are insured, or the number of deceased who have generated death benefits under the policies. The OCC does have documents provided by the bank to OCC examiners during examinations that are responsive to the aspects of your request dealing with revenues and peer data…As previously stated, all of this responsive information is properly exempt pursuant to FOIA exemptions 4 and 8.”
The absurdity of Stipano’s position rests in this paragraph:
“All of the information you requested was either provided by JPMC to the OCC or created by the OCC in the course of its examination of JPMC. Therefore, all of the responsive information is related to the OCC’s examination of JPMC and examination reports prepared by the OCC, and it is exempt from disclosure under the FOIA pursuant to Exemption 8. The application of Exemption 8 to the responsive materials promotes “frank cooperation” between JPMC and the OCC…”
Simple translation: JPMorgan Chase can be trusted to engage in “frank cooperation” with its regulators as long as the bank and the regulator keep the public in the dark about the details of corruption festering inside the bank.
Putting aside for the moment the public’s right to know if the same too-big-to-manage banks that ushered in the worst economic crash since the Great Depression in 2008 are gaming the system again, there is simply no basis at all to believe that JPMorgan Chase engages in “frank cooperation” with its U.S. regulators, regardless of how much is secreted away for them.
As Stipano well knows or should know, on October 28, 2008, JPMorgan turned in Bernie Madoff for potentially running a fraud, citing numerous alarm bells and calling his returns too good to be true. It filed its “Suspicious Activity Report” not with U.S. regulators but with the United Kingdom’s Serious Organized Crime Agency – leaving its U.S. regulators in the dark until Madoff confessed.
On March 15, 2013, when the Senate Permanent Subcommittee on Investigations released its report on how JPMorgan Chase had gambled and lost over $6 billion in depositor funds by making high-risk investments in exotic derivatives, the report specifically addressed how JPMorgan had kept the OCC in the dark and how the OCC had been blindsided:
“JPMorgan Chase dodged OCC oversight of its Synthetic Credit Portfolio [SCP] by not alerting the OCC to the nature and extent of the portfolio; failing to inform the OCC when the SCP grew tenfold in 2011 and tripled in 2012; omitting SCP specific data from routine reports sent to the OCC; omitting mention of the SCP’s growing size, complexity, risk profile, and losses; responding to OCC information requests with blanket assurances and unhelpful aggregate portfolio data; and initially denying portfolio valuation problems.
“The OCC failed to investigate CIO trading activity that triggered multiple, sustained risk limit breaches; tolerated bank reports that omitted portfolio-specific performance data from the CIO; failed to notice when some monthly CIO reports stopped arriving; failed to question a new VaR [Value at Risk] model that dramatically lowered the SCP’s risk profile; and initially accepted blanket assurances by the bank that concerns about the SCP were unfounded.”
Given this recent history between the OCC and JPMorgan Chase, the press has every right to demand and receive answers when we observe a vast, dark industry with ghoulish overtones going unregulated.
In our May 12, 2014 appeal to the OCC, we pointed out the following:
“Since December of 2013, JPMorgan Chase has experienced five unusual deaths among current workers in their 30s and one unusual death of a 28-year old former worker whose brother currently works for JPMorgan and was cited by name in the U.S. Senate’s Permanent Subcommittee on Investigations’ report of JPMorgan’s London Whale trading debacle…
“Three of the six JPMorgan-related deaths cited in the article referenced above were allegedly from leaps from buildings in London, Hong Kong and Manhattan, respectively. None of JPMorgan’s peer banks — such as Citigroup, Morgan Stanley or Goldman Sachs – have publicly reported any suicides in the past six months as far as I’m aware. A 12-month review of public death notices among Citigroup employees revealed no cluster of deaths of young men in their 30s. (JPMorgan is reported to have 260,000 employees versus Citigroup’s reported 251,000.)…
“Why young men in their 30s are dying at JPMorgan but not at its peer banks is a matter of critical public health and safety concern. It is against public policy to keep the records secret. As the Chief Medical Examiner of Connecticut (where one of the deaths occurred) states on its web site: ‘Medicolegal investigations also protect the public health: by diagnosing previously unsuspected contagious disease; by identifying hazardous environmental conditions in the workplace, in the home, and elsewhere; by identifying trends such as changes in numbers of homicides, traffic fatalities, and drug and alcohol related deaths; and by identifying new types and forms of drugs appearing in the state, or existing drugs/substances becoming new subjects of abuse.’
“Additionally, research into this matter has revealed that just four of Wall Street’s largest banks hold a total of $68.1 billion in Bank-Own Life Insurance assets. Using a legal expert’s estimate that there is frequently a 10-to-1 ratio between assets and life insurance in force, this could potentially translate into these four banks holding $681 billion in life insurance policies on their workers – policies which pay the corporation the death benefit income tax free.”
Wall Street On Parade previously filed a Freedom of Information Law (FOIL) request with the New York State Insurance Department. Amazingly, it responded that it “does not have any of the records” for JPMorgan’s BOLI policies, a company headquartered in its state with tens of billions of life insurance policies on its workers. (See NYS Department of Financial Services/NYS Insurance Dept Response to Freedom of Information Law Request by Wall Street On Parade Seeking Information on Life Insurance Held by JPMorgan on Employees Lives.)
Perhaps New York State regulators do not even know this type of bank life insurance exists. In New York, nothing is really “official” until it appears in the Old Gray Lady. The New York Times made BOLI official just recently, on June 23, 2014, with an article by David Gelles.
Two days after Gelles’ article, Teresa Tritch continued the topic on the New York Times editorial page editor’s blog, writing: “It’s not illegal, but it’s dubious in the extreme.” Tritch goes on to state that “At the very least, there needs to be better disclosure” since it is the public that is subsidizing the generous tax breaks on the policies. (Both the death benefit as well as the cash buildup in the policies are received tax free to the corporation. If the policy were to be cashed in prior to the death of the insured, back taxes on the gains would have to be paid.)
If the OCC has no records pertaining to the number of employees insured by JPMorgan under BOLI policies; has no idea as to the face amount of the policies or the rank of employees who are insured, then it cannot possibly know if JPMorgan is complying with the 2006 law that limits this insurance to just the highest-paid 35 percent of employees. If the OCC does not know “the number of deceased who have generated death benefits under the policies,” it could not possibly spot a pattern of suspicious deaths. (Given its obfuscation with the Senate during the Independent Foreclosure Review matter, is there any reason to believe it would bring troublesome findings to the attention of Congress under any circumstances?)
If the OCC is in the dark about much of this insurance and the key insurance regulator in New York State is as well, who exactly is regulating this vast dark area of tax-subsidized death profiteering?
We suspect Wall Street’s powerful lobbyists have imposed this dark curtain because BOLI is exempt from the Volcker Rule – these insurance assets can, and are, remaining under bank control and invested in high-risk instruments as proprietary bets for the house – essentially repealing the Volcker Rule and potentially laying the foundation for the next Wall Street blow up.
The OCC says that it does have documents provided by JPMorgan “that are responsive” to the revenues JPMorgan receives from BOLI policies,” but it says those are privileged as well. This is akin to telling the public, whose pensions and 401(k) mutual funds are holding millions of shares of JPMorgan Chase stock, that it’s none of your business how JPMorgan Chase generates its revenues. According to OCC thinking, shareholders are not entitled to know to what extent the business model of this mega global behemoth is built around providing prudent consumer and business loans or is built around tax dodges and longevity bets on the lives of its workers.
Given the financial crash of 2008, the Bernie Madoff decades long Ponzi scheme, the decidedly not “independent” Independent Foreclosure Review, and the London Whale debacle, regulators have not earned the right to tell the public “just trust us.”