JP Morgan Chase

In April 2012, Jamie Dimon, CEO at JP Morgan Chase, commented on concerns at the time about the bank's trading practices. "It's a tempest in a tea pot," he said.

On May 10, in a quickly arranged conference call with journalists and investors, Dimon admitted he was "dead wrong." In fact, the bank had just lost upwards of $2 billion in a matter of weeks.

JP Morgan has the most assets of any U.S. bank and during the 2008 financial crisis was the only major bank in the country to remain profitable. It surpassed Bank of America in assets in October 2011. Now, everyone wants to know what went wrong.

Regulators are delving into what JP Morgan Chase told investors about its finances and risks in the weeks leading up to the multibillion dollar loss.

The chairman of the Securities and Exchange Commission (SEC) Mary Schapiro reported to the Senate Banking Committee that the SEC is reviewing JP Morgan's earnings statements and first-quarter financial reports to see if they were "accurate and truthful."

She and Gary Gensler, chairman of the Commodity Futures Trading Commission said the gigantic loss at JP Morgan should indicate to regulators that they must tighten regulations enacted during the 2010 financial overhaul .

"It would be wrong for us not to take this as an example," Schapiro said.

Among the major legal and regulatory proceedings JP Morgan Chase has confronted are:

  • Conflicts of interest on investment research: These proceedings finished in December 2002 when Chase paid fines of $80 million, along with nine other banks, which were charged with deceiving investors by using biased research. All ten banks paid $1.4 billion in total. Along with the fines, the settlement forced the banks to separate investment banking from research and banned the distribution of initial public offering shares.
  • Enron: JP Morgan Chase paid $2 billion in fines and legal settlements for its participation in the fraudulent stock financing of Enron Corporation. The corporation disintegrated during a financial scandal in 2001.
  • WorldCom: JP Morgan Chase participated in underwriting of $15.4 billion of WorldCom's bonds. JP Morgan settled by paying $2 billion in March 2005. Only Citigroup, which paid $2.6 billion, settled for more.
  • Jefferson County, Alabama: JP Morgan Chase, in November 2009, agreed to pay $722 million to settle a probe by the U.S. Securities and Exchange Commission into sales of derivatives that brought Alabama's county with the most number of people practically to bankruptcy. The settlement was arranged a week after Mayor Langford of Birmingham was convicted of bribery, money laundering and tax evasion having to do with bond swaps for Jefferson County. The SEC charged the bank with fraudulent bond deals and bribery of his friends on the commission in addition to fraudulently higher interest rates on deals involving interest-rate swaps.
  • Violation of UK client money rules: In June 2010, the bank was fined $49.12 million for failing to protect clients' money by not segregating client funds from corporate funds. JP Morgan reported its error to UK authorities, corrected its mistakes, and cooperated in a follow-up investigation, thus getting their fine reduced by 30 percent.
  • Overcharging active duty military personnel for mortgages: The bank was in violation of the Service Members Civil Relief Act that lowered mortgage rates to 6 percent and forbade foreclosure on homes of those on active military duty. A class action lawsuit was filed and Chase agreed to pay $27 million to settle the suit.

The bank was formed in 2000 when Chase Manhattan Corporation merged with J.P. Morgan & Company.

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