Econintersect: The fine paid by JP Morgan Chase (NYSE:JPM) is nearly $1 billion dollars for “failure to adequately supervise” the traders responsible for their loss of $6.2 billion on derivative trades gone wrong in 2012. The total fines levied come to $920 million and will be paid to U.S and UK regulators and agencies.
The settlement includes $300 million to the U.S. Office of the Comptroller of the Currency ($300 million), the Securities and Exchange Commission ($200 million), the Federal Reserve ($200 million) and the UK Financial Conduct Authority ($220 million) JP Morgan is a U.S. bank but the “Whale Trade” event in question occurred in their London offices.
Actions admitted in the settlement include:
- Initial dismissive comments by CEO Jamie Dimon.
- Management withheld information from its own audit committee.
- Deliberately mislead regulators.
- Deliberately deprived its own board of critical information during the crisis.
- Through the chain of subterfuse deprived investors of information that should have been disclosed.
What has been disclosed in this settlement is a series of accounting control frauds that are clearly a collection of major white collar felonies. The settlement is entirely a civil matter.
Who are the individuals involved? The Financial Times said:
The SEC said that the “senior management” referred to one or more of five individuals in place in May 2012: Mr Dimon, Doug Braunstein, then chief financial officer, John Hogan, then chief risk officer, Shannon Warren, then controller, and Lauren Tyler, general auditor.
An amount approaching $1 billion dollars sounds like a large amount. However, the company has annual revenues exceeding $100 billion and quarterly profits typically in the $6 – $7 billion range. Such a fine for criminal actions is really just chicken feed.
GEI contributor Roger Malcom Mitchell said on his blog:
The top management was derelict in its duty and lied to Congress. I wonder who’s going to jail.
…
Not only are Dimon and his top honchos not going to jail, they are not even prosecuted. In fact, they aren’t even criticized.
The Financial Times article mentions that there are a number of other investigations into JP Morgan trading practices still ongoing.
Sources:
- JPMorgan hit with $920m in fines over ‘whale’ trade (Tom Braithwaite, Kara Scannell and Daniel Shaffer, Financial Times, 19 September 2013)
- JPMorgan to Pay $920 Million Penalty for London Whale Losses (Melanie Wadell, ThinkAdvisor, 19 September 2013)
- You destroyed the world and paid a 10 cent fine. You are a big bank. (Rodger Malciolm Mitchell, Monetary Sovereignty, 19 September 2013)
