Accusations are flying and the lawyers have been called in at JP Morgan to defend current and former executives, including CEO Jamie Dimon from accusations they were aware of the Ponzi scheme being run by Bernie Madoff. Attorney David Rosenfeld is bringing a new lawsuit based on interviews with Madoff himself. If any of the JP Morgan executives are found guilty, it could have a major effect on the company and its customers’ faith in its reliability. Reuters reports on the allegations.
“JPMorgan was uniquely positioned for 20 years to see Madoff’s crimes and put a stop to them,” the lawsuit said.
“But faced with the prospect of shutting down Madoff’s account and losing lucrative profits,” it added, “JPMorgan – at its highest level – chose to turn a blind eye.”
JPMorgan spokeswoman Tasha Pelio declined to comment on the lawsuit, one of several seeking to hold bank officials responsible for failing to uncover the fraud before it surfaced publicly in December 2008. Madoff, 75, is serving a 150-year prison term after pleading guilty to fraud in March 2009.
The revelations came 1-1/2 months after JPMorgan agreed to pay $2.6 billion to settle lawsuits over its Madoff dealings.
Those lawsuits were brought by the U.S. government; Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC; and other shareholders. Picard has estimated that Madoff customers lost $17.3 billion.
The accords included a “deferred prosecution agreement,” or DPA, to resolve criminal charges, under which JPMorgan acknowledged its responsibility for failing to stop Madoff, who was an important client of the bank for two decades.
Upper management was not implicated in that agreement.
But David Rosenfeld, a lawyer who filed the new lawsuit, said “many hours” of interviews with Madoff, including in person on October 28 at the federal prison in Butner, North Carolina, suggested that top officials knew of the fraud.
“The DPA did not disclose how senior executives at JPMorgan knew that he was engaged in some kind of fraud, and that he should have been shut down years earlier,” Rosenfeld, a partner at Robbins Geller Rudman & Dowd, said in a phone interview.
Asked if Madoff could be trusted, Rosenfeld said: “I think he can. He certainly sounded credible to us, and there is no reason for him to lie at this point. He is remorseful, and he does feel compelled now to do what he can to help his victims. The things he said are also easily verifiable.”