|Crook Madoff’s bank JPMorgan to pay US$2.5b
American bank JPMorgan Chase & Co., already beset by costly legal woes, will pay over US$2.5 billion for ignoring obvious warning signs of convicted Jewish fraudster Bernard Madoff's massive Ponzi scheme, authorities said.
The bank will pay US$1.7 billion to settle criminal charges and a US$350 million civil penalty for what the Treasury Department called “critical and widespread deficiencies'' in its programs to prevent money laundering and other suspicious activity.
It also will pay US$543 million to settle other victim claims, according to settlements announced by Irving H. Picard, the trustee recovering money for thousands of Madoff's victims, AP reports.
George Venizelos, head of the FBI's New York office, said the company failed to carry out its legal obligations while Madoff “built his massive house of cards.''
“It took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for JPMorgan to alert authorities to what the world already knew,'' he said.
JPMorgan, the primary bank through which Madoff operated since 1986, withdrew about US$300 million of its own money from Madoff feeder funds in 2008, soon after the bank's London desk circulated a memo describing JPMorgan's inability to validate Madoff's trading activity or custody of assets and his “odd choice'' of a one-man accounting firm, the government said.
US Attorney Preet Bharara said in a release that “JPMorgan connected the dots when it mattered to its own profit, but was not so diligent otherwise.''
He added that financial institutions “must exercise due care not only with their own money but with other people's money also.''
The US$1.7 billion represents the largest forfeiture by a US bank and the largest Department of Justice penalty for a Bank Secrecy Act violation, the government said.
The settlement includes a so-called deferred prosecution agreement that requires the bank to acknowledge failures in its protections against money laundering but also allows it to avoid criminal charges. No individual executives were accused of wrongdoing.
The agreement resolves two felony violations of the Bank Secrecy Act in connection with the bank's relationship with Bernard L. Madoff Investment Securities, the private investment arm of Madoff's former business.
The civil penalty was imposed by the Treasury Department's Office of the Comptroller of the Currency.
The government said the penalty was assessed because the bank failed to pass along to US authorities suspicions about Madoff it had reported to Britain's Serious Organised Crime Agency, and because the bank failed to detect and report other cases of suspicious activity, including more than US$2 billion in transactions involving the Puerto Rican affiliate of an unidentified Venezuelan bank.
Under the agreement, criminal charges will be deferred for two years as JPMorgan admits to its conduct, pays the US$1.7 billion to victims of Madoff's fraud and reforms its anti-money laundering policies, prosecutors said.
A statement of facts included in the agreement describes internal communications at JPMorgan expressing concerns about how Madoff was generating his purported returns. It says executives were disturbed by the fact that Madoff wouldn't let the bank examine his books.
“How much do we have in Madoff at the moment?'' a bank analyst wrote in a 2008 email. “To be honest, the more I think about it, the more concerned I am.''
In a statement, JPMorgan said it recognized it “could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time.''
It noted that in late October 2008 it filed the UK suspicious activity report but did not file one in the United States. The fraud was revealed with Madoff's arrest in December 2008.
Convict Madoff, 75, is serving a 150-year prison term.