Read

Search form

JPMorgan Hit With $920 Million Fines for $6 Billion London Whale Derivatives Scandal

JPMorgan Hit With $920 Million Fines for $6 Billion London Whale Derivatives Scandal
Fri, 9/20/2013 - by Dominic Rushe
This article originally appeared on The Guardian

JP Morgan has agreed to pay about $920 million in penalties to U.S. and U.K. regulators over the "unsafe and unsound practices" that led to its $6.2 billion London Whale losses last year.

The U.S.'s biggest bank will pay $300 million to the office of the comptroller of the currency, $200 million to the Federal Reserve, $200 million to the securities and exchange commission (SEC) and £137.6 million ($219.74 million) to the U.K.'s financial conduct authority.

JP Morgan admitted wrongdoing as part of the settlement, an unusual step for a finance firm in the crosshairs of multiple legal actions.

"JP Morgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses," co-director of the SEC's division of enforcement, George Canellos, said.

"While grappling with how to fix its internal control breakdowns, JP Morgan's senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company's problems and determine whether accurate and reliable information was being disclosed to investors and regulators."

In a statement the OCC blamed "unsafe and unsound practices related to derivatives trading activities conducted on behalf of the bank by the chief investment office (CIO)", for the fine.

The OCC said its inquiries had found inadequate oversight and governance to protect the bank from material risk, inadequate risk management, inadequate control over pricing of trades, inadequate development and implementation of models used by the bank, and inadequate internal audit processes.

The US authorities are still pursuing JP Morgan. The Justice Department is pursuing criminal charges against some of the bankers responsible for the massive loss. In an indictment unsealed in federal court this week Javier Martin-Artajo, who oversaw trading strategy at the bank's London office, and Julien Grout, a trader who worked for him, were charged with securities fraud, conspiracy, filing false books and records, wire fraud and making false filings to the SEC.

Grout's lawyer said this week that his client was being "unjustly played as a pawn in the government's attempt to settle its highly politicized case against JP Morgan Chase."

The bank also faces another fine from the commodity futures trading commission which is still investigating whether the bank is guilty of market manipulation.

Jamie Dimon, the bank's chairman and chief executive, initially dismissed the mounting losses at the bank's London offices as a "tempest in a teapot". In a statement Dimon said: "We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company."

This week in a letter to staff he warned: "Unfortunately, we are all well aware of the news around the legal and regulatory issues facing our company, and in the coming weeks and months we need to be braced for more to come."

The admission of wrongdoing is a major victory for the SEC. U.S. judges in recent years have questioned fines where banks were allowed to neither admit nor deny wrongdoing. Judge Jed Rakoff blocked a 2011 SEC settlement with Citigroup because he said the lack of an admission of wrongdoing made it impossible for him to determine whether the fine was "fair, reasonable, adequate and in the public interest".

John Coffee, Adolf A Berle professor of law at Columbia Law School, described the fine as "somewhat less than satisfactory".

"The victims of this enormous loss were the shareholders of JP Morgan and the remedy is for those shareholders to pay $900 million-plus in fines. It's not just adding insult to injury, it's adding injury to injury.

He said no senior bank official had been charged with wrongdoing and described the those indicted so far as "relatively small fish".

"Ideally the regulators should fine actual individuals who are responsible. But time and again the SEC settles for large penalties and gives virtual immunity to some officers."

Add new comment

Sign Up

Article Tabs

basic income, universal basic income, Scotland basic income, Holland basic income, Finland basic income, Guy Standing, Basic Income Network Scotland

One of the driving forces behind the basic income proposals in Scotland is the Fairer Fife Commission, which aims to tackle social inequality through living wage, living rent and basic income programs so that no worker lives in poverty.

police repression, mass arrests, Disrupt J20 Collective, National Lawyers Guild, kettling protesters, anti-Trump protests, anti-Trump resistance, Light on Friday, Movement for Black Lives, anti-fascist movement, riot police, police surveillance, DHS

More than 200 people who were mass-arrested at the Washington, D.C. protests against the inauguration of Donald Trump have been hit with felony riot charges that are punishable by up to 10 years in prison and quarter-million-dollar fine.

Isidro Baldenegro, Goldman Environmental Prize, illegal logging, killing activists, activist intimidation, Berta Cáceres

Indigenous activist Isidro Baldenegro López, who won the prestigious Goldman Environmental Prize for his crusade against illegal logging, has been gunned down, becoming the second award-winner murdered in less than 12 months.

Women's March, anti-Trump protests, Trump resistance, women's rights, mass protests, global protests, pussy hats, people against Trump

What began as a Facebook post by a Hawaii grandmother the day after Hillary Clinton's loss in November blossomed into a massive protest uniting people of all ages, races and religions who turned out across the globe.

Pakistan drought, Pakistan climatic changes, species die-off, climate-borne disease, Pakistan glacier run-off

“This sickness of fish is an indicator of the worst climatic changes occurring in the region,” said Pakistan fisheries director Zubair Ali, and “will have negative impacts on many sectors, in particular food, water and energy.”

creative activism, Act Out, Donald Trump, Trump Inauguration, Inauguration 2017, #DisruptJ20, Women’s March, J20, anti-Trump protests, non-violent direct action, Samantha Castro, WACA, dissent, protest, political left, hierarchy, NGO, community organizing

As stages are set for the upcoming inauguration, activists across the country prepare to strike, block, march and disrupt. We’ll outline what's happening in D.C. and where you are.

Posted 6 days 6 hours ago

The 142-mile-long Trans-Pecos Pipeline would bring fracked gas to the small border city of Presidio, where it would continue on into northern Mexico – in the process crossing under the Rio Grande, threatening fragile water supplies.

Posted 5 days 17 hours ago
money in politics, corporate political class, Michael Gecan, community organizing, parallel political structures, Death of the Liberal Class, Industrial Areas Foundation, Donald Trump, Saul Alinsky, Ralph Nader, mass movements, popular movements

"People who understand power tend to have the patience to build a base, do the training, raise the money, so when they go into action they surprise people,” says community organizer Michael Gecan of the Industrial Areas Foundation.

Posted 5 days 17 hours ago
Betsy DeVos, public eduction, Chicago Public Schools, privatized education, charter schools, Donald Trump, voucher programs, Charter School Program, dismantling public schools, national voucher program, Wisconsin Education Association Council, Wisconsin t

The president-elect has already pledged $20 billion to expand voucher programs nationwide, and his appointee for Education Secretary, Betsy DeVos, views dismantling public education as a mission from God.

Posted 6 days 6 hours ago
Obamacare, Affordable Care Act, Obamacare repeal, repeal and replace, Congressional Budget Office, Paul Ryan, Donald Trump

The Congressional Budget Office also estimated that premiums for policies purchased through the marketplaces or directly from insurers would increase by 20 to 25 percent next year if Obamacare is repealed without a replacement.

Posted 5 days 18 hours ago
map

More than 20 places around DC are opening up their doors to people attending the Women’s March

Inauguration Day

Some of the Inauguration Day Protests photos sent to us by our friends on the streets of DC.

Donald Trump, fake news, populist nationalist, Trump lies, Trump propaganda, Sean Spicer

Donald Trump is such a consummate liar that in coming days and years our democracy will depend more than ever on the independent press – finding the truth, reporting it, and holding Trump accountable for his lies.

creative activism, Act Out, Donald Trump, Trump Inauguration, Inauguration 2017, #DisruptJ20, Women’s March, J20, anti-Trump protests, non-violent direct action, Samantha Castro, WACA, dissent, protest, political left, hierarchy, NGO, community organizing

As stages are set for the upcoming inauguration, activists across the country prepare to strike, block, march and disrupt. We’ll outline what's happening in D.C. and where you are.

The 142-mile-long Trans-Pecos Pipeline would bring fracked gas to the small border city of Presidio, where it would continue on into northern Mexico – in the process crossing under the Rio Grande, threatening fragile water supplies.