Photo: JP Morgan Chase has agreed to pay $2.5 in penalties, including $1.7 billion to settle criminal charges, a $350 million civil penalty and $543 million to Bernie Madoff’s victims.
Stephen Cook: I still don’t get why these banks are fined such huge amounts yet are allowed to remain in business! Interestingly, SOME of this massive fine money will be used to help the millions of customers left stranded, but I’m still fascinated why the first sentence of this report below says that “JPMorgan Chase agreed”. I mean, did they have a choice NOT to agree?…hmmm.
JPMorgan Chase to Pay $2.5 Billion in Penalties Tied to Bernie Madoff’s $65 Billion Scam
By John Marzulli , Dareh Gregorian , Daniel Beekman and Larry Mcshane, New York Daily News – January 8, 2014 | Thanks to Golden Age of Gaia.
The payout is the largest-ever bank forfeiture as well as the biggest Department of Justice penalty for a Bank Secrecy Act violation, though victims believe it’s not enough.
JPMorgan Chase agreed to a record $2.5 billion in penalties Tuesday in a deal that spared its executives any chance of jail time in Bernard Madoff’s $65 billion Ponzi scheme.
But in a different courthouse — just a couple of hours after the deal was announced — a small-business owner was sentenced to four years in prison for duping a wealthy investor. The disparity reads like a tale of two cities.
The settlement by JPMorgan, the nation’s largest bank, ended its 22-year relationship with the man behind the crime of the century — and infuriated Madoff victims who denounced the agreement as a slap on the wrist.
“If you’re a poor person and you jump a turnstile in the subway, you’re more likely to end up in jail than if you’re someone like (JPMorgan head) Jamie Dimon,” said Norma Hill, 73, who lost about $2 million.
Another victim, who asked not to be named, echoed Madoff himself by saying the bank was well aware of the bespectacled investment guru’s shaky house of cards as more than 4,000 investors were bilked.
“It’s woefully short of what it should be,” the Bergen County, N.J., resident told the Daily News of the penalties. “There seems to be evidence that they were well aware of irregularities.”
The penalty includes a record $1.7 billion forfeiture to settle criminal charges in the case, the largest against a bank in U.S. history. It was accompanied by a $350 million civil penalty payable to the Treasury Department and another $543 million to settle claims from Madoff investors.
A full 100% of the forfeited money will go to Madoff’s legion of victims, said Manhattan U.S. Attorney Preet Bharara.
Photo: Fed prosecutor Preet Bharara says JPMorgan ‘failed miserably’ in keeping an eye on Bernard Madoff. ANDREW GOMBERT/EPA
Irving Picard, the trustee recovering the lost billions of Madoff investors, has now collected roughly $9.7 billion of the estimated $17.5 billion that disappeared.
“JP Morgan . . . failed and failed miserably,” said Bharara, noting Madoff funneled more than $150 billion through a single account at the bank without buying one stock — or raising one eyebrow.
“In part because of that failure, for decades Bernie Madoff was able to launder billions of dollars in Ponzi proceeds,” Bharara said.
In a document outlining the bank’s wrongdoing, prosecutors argued “the Madoff Ponzi scheme was conducted almost exclusively through” various accounts “held at JPMorgan.” On two occasions, in 2007 and 2008, JPMorgan’s own computer system raised red flags about Madoff, according to prosecutors. But both times, prosecutors say, bank employees “closed the alerts.”
On the same day the JPMorgan officials dodged prosecution, the former president of a small environmental company received far harsher treatment.
Theodore Sweeten, 61, was sentenced in Brooklyn Federal Court to four years in prison for his role in scamming an associate out of $5 million. Sweeten, whose firm is based in Oregon, was ordered to repay the $5 million and pay the government a $600,000 fine.
Civil rights lawyer Norman Siegel, who has no role in either case, said the spectacle of a big company buying its way out of trouble while average citizens go to jail is a troubling — and all too familiar — sight.
“It explains why people are getting more cynical about the justice system,” Siegel said. The discrepancy, he said, gives the appearance of “unequal justice.”
Justice for global financial giant JPMorgan was a deferred prosecution agreement, allowing the company to admit breakdowns in fraud detection while sidestepping criminal charges.
Photo: Bernie Madoff (center), who orchestrated a Ponzi scheme that involved $65 billion in investments, is serving a 150-year sentence.Marc A. Hermann for New York Daily News
Not a single employee at JPMorgan — which did business with Madoff from 1986 through his 2008 arrest — was accused of wrongdoing. The decision to go after the company and not the corporate executives appeared to fly in the face of comments made by Bharara in July.
“I don’t think anyone is too big to indict,” he declared last summer. “No one is too big to jail.”
But he defended the decision to settle with JPMorgan — despite evidence the only time the company took action against Madoff was when its own money was in jeopardy.
“We often charge individuals,” said the federal prosecutor. “We sometimes charge institutions. This is about an institutional failure . . . That’s why it was brought in the way it was brought today.”
Court papers laid out how JPMorgan, once its own investments were threatened, paid plenty of attention to Madoff’s account. The bank withdrew roughly $300 million of its own investments with Madoff shortly before his arrest — sparing it the fate of investors left penniless, the court papers said.
And though JPMorgan employees had their suspicions about Madoff dating back to the late ’90s, “at no time . . . did (JPMorgan) personnel communicate their concerns” to bank officials until the very end, the court papers said.
Madoff, now 75, confessed to the long-running scheme. He’s behind bars doing a 150-year sentence. In a jailhouse interview, he asserted that JPMorgan and other banks were aware of his multibillion-dollar scam.
“It was very obvious to the banks what was going on,” he said. “With me, they turned a blind eye.”
JPMorgan had previously denied knowing anything about Madoff’s monstrous fraud.
A company spokesman, in an email, acknowledged some degree of responsibility for the staggering scam.
“We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time,” said JPMorgan spokesman Joe Evangelista.
The spokesman added that the bank believes that none of its workers “knowingly assisted Mr. Madoff’s Ponzi scheme.”
Under the deal with JPMorgan, the criminal charges will be dismissed in two years if the bank follows the guidelines of the agreement.
Photo: While no JPMorgan employees yet face criminal charges, fraudster Theodore Sweeten got four years in prison Tuesday for a $5 million scam.
There was no such offer for defendant Sweeten at the courthouse across the East River. He pleaded guilty to wire fraud last fall. Charges against two alleged co-conspirators are pending.
Sweeten, a father of two with no criminal history, siphoned $600,000 of the investor’s money for personal use, including paying alimony, records show. He pleaded for mercy from Judge Nicholas Garaufis, saying his elderly mom and young daughters need him to care for them. Garaufis said Sweeten deserved jail time for the scam.
Noted defense lawyer Ron Kuby said he prefers the bank version of justice.
“I wish my clients, when they got caught, could simply return the money they stole, admit they were wrong and that’s it,” Kuby said. “Not much of a deterrent, though.”
Openhearted Rebellion 