Why am I not surprised to read a headline that includes “fraud” and JPM?”
The US Department of Justice, another completely corrupt, perverse institution, was about to sue JPM for its admitted “serious misrepresentations” about mortgage backed securities. But, at the last minute, JPM's Dimon and Attorney General Holder reached a secret deal.
Despite admissions of wrongdoing by JPM, which, in a normal situation NOT involving a TBTF bank, there would have been perp walks and serious jail time, the US DOJ reached a SHAM settlement with JPM, which settlement is NOW itself the subject of a separate lawsuit. (The complaint is here: https://www.scribd.com/doc/206070627/Complaint-%E2%80%93-Better-Markets-v-U-S-Department-of-Justice).
The Lawsuit:
The lawsuit was filed on February 2, 2014, in the US District Court, District of Columbia, Case Number 1:14-cv-00190-BAH, captioned: “Better Markets, Inc. v. Department of Justice, Eric Holder, Jr.
The sixty page Complaint challenges the “validity of the historic and unprecedented $13 billion contractual agreement between the DOJ and JPMorgan Chase & Co. that was announced on November 19, 2013 but never reviewed or approved by any court.”
The lawsuit alleges that “The $13 Billion Agreement is a mere contract whereby JP Morgan Chase agreed to pay $13 billion in exchange for complete civil immunity from DOJ for years of pervasive, egregious, and knowing alleged fraud and other illegal conduct related to the worst financial crash in the U.S. since 1929, which caused the worst economy in the U.S. since the Great Depression (“Financial Crisis”). The Financial Crisis is estimated to cost the U.S. between $13 trillion and $38 trillion (which would be as much as $120,000 for every man, woman and child in the country). As the DOJ admitted, JP Morgan Chase’s illegal conduct in making “serious misrepresentations to the public” and “knowingly bundl[ing] toxic loans and sell[ing] them to unsuspecting investors” had a “staggering” impact, “helped sow the seeds of the mortgage meltdown,” and “contributed to the wreckage of the” Financial Crisis.” (Complaint, at ¶¶ 1-3).
It goes on to point out that the DOJ JPM deal “was the product of negotiations conducted entirely in secret behind closed doors, in significant part by the Attorney General personally, who directly negotiated with the CEO of JP Morgan Chase, the bank’s “chief negotiator.” No one other than those involved in those secret negotiations has any idea what JP Morgan Chase really did or got for its $13 billion because there was no judicial review or proceeding at all regarding this historic and unprecedented settlement. However, it is known that JP Morgan Chase’s $13 billion did result in almost complete nondisclosure by the DOJ regarding JP Morgan Chase’s massive alleged illegal conduct.” (Complaint, at ¶ 6).
So, why is this a problem? Simple, follow the money.
Since JPM admittedly defrauded investors, those same victims are either filing their own lawsuits, or will be filing their own lawsuits, provided that the statute of limitations has not run out. Any of those potential victims would naturally want to see what proof the DOJ managed to amass, including details, facts, names, dates, etc. However, as the lawsuit notes, NONE of this critical source information was disclosed AT ALL!
Why am I not surprised by this? Who said fascism? Correct!!!!
The lawsuit alleges: “Notwithstanding such extensive and historic illegal conduct that resulted in a $13 billion payment, the DOJ did not disclose the identity of a single JP Morgan Chase executive, officer, or employee, no matter how involved in or responsible for the illegal conduct. In fact, the DOJ did not even disclose the number of executives, officers, or employees involved in the illegal conduct or if any of them are still executives, officers, or employees of JP Morgan Chase today. Moreover, the DOJ did not disclose the material details of what these individuals did, when or how they did it, or to whom and with what consequences. The DOJ was even silent as to which specific laws were violated, to what degree, and by what conduct. The DOJ also did not disclose even an estimate of the amount of damage JP Morgan Chase’s years of illegal conduct caused or how much money it made or how much money its clients, customers, counterparties, and investors lost. Remarkably, the DOJ does not even clearly state the period for which it is granting JP Morgan Chase immunity: The $13 Billion Agreement states that the investigation spanned the period between 2005 and 2008; another document refers to JP Morgan Chase’s illegal conduct between 2005 and 2007; and the DOJ press release references actions in connection with the listed RMBS issued “prior to January 1, 2009.”
“Thus, these and many other critical facts remain unknown and undisclosed in the substantively uninformative settlement agreement; the brief and misleadingly-labeled document entitled “Statement of Facts” (“SOF”), which was clearly drafted by the DOJ and JP Morgan Chase to conceal rather than reveal; or the press release issued by DOJ to trumpet the $13 Billion Agreement (“Press Release”).
“As a result, no one has any ability to determine if the $13 Billion Agreement is fair, adequate, reasonable, and in the public interest or if it is a sweetheart deal entered into behind closed doors that, by design, intent, or effect, let the biggest, most powerful, and well-connected bank in the U.S. off cheaply and quietly for massive illegal conduct that contributed to the Financial Crisis and the economic disaster it caused. Indeed, one could argue that the $13 billion payment was for making sure no one ever learns the scope and detail of JP Morgan Chase’s illegal conduct.” (Complaint, ¶¶ 8-10).
So let me make sure I have understood it correctly. JPM’s Dimon personally engineered, in direct negotiations with THE ATTORNEY GENERAL of the USA, a secret, back room deal, which provides blanket immunity protecting JPM from any civil lawsuits or judgments based on their admitted fraud. Too Big To Fail? Indeed.
Here is what some press article had to say. And, note that none of the articles mentions the outrageous REASONING as to why the DOJ / JPM settlement is so abhorrent! From the lawsuit, at paragraph 13: “Given all those undisclosed facts and the shroud of secrecy in which the DOJ and JP Morgan Chase have cloaked the $13 Billion Agreement, the public could well perceive it as an effort by the DOJ to keep JP Morgan Chase’s illegal conduct nonpublic so that the agreement between DOJ and JP Morgan Chase could never be independently scrutinized or evaluated. Would that perception have a factual basis? No one knows, and without review and assessment by a court, no one will ever know because transparency, accountability, and oversight were all sacrificed in this settlement and in the settlement process.”
Back to the lawsuit, from paragraph 17: “the total lack of transparency and meaningful information regarding what JP Morgan Chase did, how they did it, how much they profited, how much clients lost, of course, ensures that no one will ever be in a position to challenge their self-serving assertions. One might think that was the point of secretly negotiating the agreement and drafting it to reveal as little as possible.” Indeed, one might.
Why is it that only Matt Taibbi has the courage to tell the truth and ask the hard questions? Why do bloggers, like me, have to point out the obvious?
Here is some press coverage so you can see for yourself:
“The non-profit group Better Markets filed a lawsuit against the Justice Department on Monday to block what it called an "unlawful" $13 billion settlement with JPMorgan Chase & Co over bad mortgage loans sold to investors before the financial crisis.
“The record settlement, which was reached in November, does not release JPMorgan from potential criminal liability over the mortgages it packaged into bonds. But Better Markets said it was still appalled that the settlement gave the bank "blanket civil immunity" for its conduct without sufficient judicial review.
"The Wall Street bailouts were bad enough, but now taxpayers are being forced to accept a secretive backroom deal that may well have been another sweetheart deal," said Dennis Kelleher, chief executive of Better Markets. (Kelleher, a former attorney at Skadden, Arps, Slate, Meagher & Flom, has become well-known for his critique of both Wall Street banks and regulators who he has often accused of failing to hold the banks accountable for wrongdoing).
"The Justice Department cannot act as prosecutor, jury and judge and extract $13 billion in exchange for blanket civil immunity to the largest, richest, most politically connected bank on Wall Street," he said.
The lawsuit itself is filed in the USDC, District of Columbia. The link to it is here: “It seeks to impose an injunction halting the settlement with JP Morgan Chase from going forward. It calls the settlement unconstitutional and also alleges it violates the Administrative Procedures Act and more importantly the Financial Institutions Reform, Recovery and Enforcement Act of 1989,” ( https://www.mcclatchydc.com/2014/02/10/217625/lawsuit-challenges-eric-ho...).
Some things to Think About:
FIRREA is typically what the DOJ has traditionally used to extract settlement terms in enforcement actions on Wall Street. Critical to understand is that if the court were to rule against the attorney general, it could discourage future use of FIRREA to reach settlements.
Naturally, given the stakes, the lawsuit has political overtones: “The entire DOJ settlement was designed to “conceal, not reveal,” insisted Kelleher, adding that such a deal carried out by the Bush administration would have drawn cackles from Democrats.” “If (former Attorney General) Alberto Gonzales did this with Halliburton, what would people say?” he asked incredulously.”
The lawsuit is, as noted, a longshot: “One prominent legal expert called the Better Markets effort a long shot. “While Better Markets is a well-intentioned and aggressive advocate for investors, I do not believe there is any basis or support in law for their position,” said John Coffee, a securities law professor at Columbia University in New York and a frequent witness before Congress. “The executive branch can settle disputes with a third party without seeking court approval.”
“Had the Justice Department filed a lawsuit, it still could settle without court approval providing it is not a class-action suit and there is no injunction involved, he said.”
“The courts don’t have a role inherently in settling all disputes,” said Coffee, suggesting a court ruling favoring Better Markets would set precedent. “I think this would greatly expand the role of the judiciary in resolving disputes.”
“Significantly, no outside law firms signed on to the Better Markets action, nor do any appear as a counsel of record. That’s often a sign that a case lacks strong backing of the underlying legal argument.”
Another fatal flaw seems to be the lack of standing, or legal right, to file the lawsuit. “It’s not clear Better Markets has legal standing to bring such a request for injunction since it was not a homeowner, investor or shareholder harmed by JP Morgan Chase’s behavior in the run-up to the financial crisis of 2008. But, undeterred, Kelleher said as a public advocacy group his request for relief is very much like groups that have successfully won court injunctions when citizen health or the environment are being harmed.
So, like all areas of law, one foresightful attorney has sought to apply an existing law in a forward looking manner. It is laudable, but not likely to lead to new legal precedent, because the lawsuit is likely to be dismissed on a 12(b) challenge.
At least one prominent Forbes’ writer seems to agree: (https://www.forbes.com/sites/danielfisher/2014/02/11/jpmorgan-settlement...)
“And in this lawsuit Better Markets fails to even state a plausible case for why the non-profit, which calls itself “the public’s voice in the fight to reform and strengthen our financial system,” has a stake in the matter. In fact, if arguments like the ones Better Markets makes were allowed in court, the government could hardly make a move without being barraged with second-guessing lawsuits by non-profits and anybody else who preferred Plan A over Plan B.”
I’ll be watching.
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