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U.S. Says JPMorgan Turned a Blind Eye to Bernie Madoff Scheme

It may strike a deal to avoid criminal charges


JPMorgan Chase JPMThe legal problems for JPMorgan Chase (JPM) just keep coming.

Sources tell the New York Times that the bank has held talks with federal prosecutors about a possible “deferred prosecution agreement,” under which it would pay a fine and offer other unspecified terms in exchange for suspended criminal charges relating to its relationship with disgraced investment guru Bernard Madoff. An independent monitor might also be appointed to monitor the bank’s compliance.

JPMorgan Beats Expectations Amid a Mountain Of Legal Costs
JPMorgan Beats Expectations Amid a Mountain Of Legal Costs

Federal authorities are investigating whether JPMorgan ignored suspicious activity at Madoff’s investment firm which should have been reported to regulators. As Madoff’s main banking partner, JPMorgan had the best vantage point to observe his financial activities, which had been questioned by some outside observers. In 2008, Madoff confessed to running the largest financial fraud in U.S. history.

In an email unearthed in a lawsuit by Madoff victims, a JPMorgan executive comments that Madoff’s results were “a little too good to be true.”

While discussions about the deal are in their early stages, the government could still pursue criminal charges under the Bank Secrecy Act. However, authorities have not yet opted to press charges against any of the bank’s employees, the sources noted.

JPMorgan recently reached a tentative agreement to pay $13 billion in fines over its actions relating to mortgage-backed securities prior to the financial collapse.

Shares of JPMorgan fell more than 1% in Thursday morning trading.

Article printed from InvestorPlace Media,

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