JPMorgan Chase & Co. (NYSE:JPM) is currently in $13 billion settlement talks with federal authorities over its mortgage malpractices. Before that case is settled, the largest U.S. bank may have to pay another big penalty or face criminal charges. A source familiar with the matter told The New York Times that regulators suspect JPMorgan Chase & Co. (NYSE:JPM) didn’t inform them about Bernard Madoff’s Ponzi scheme. The Jamie Dimon-led bank was the banker of Bernard Madoff for about two decades and, claim authorities, it was aware of the Ponzi scheme.
JPMorgan would want a deferred prosecution agreement
Bernie Madoff is currently serving a 150-year jail term. He is one of the most notorious financial criminals in living memory. Madoff orchestrated a Ponzi scheme in which investors lost more than $17 billion. Paper losses stood at about $64 billion. JPMorgan Chase & Co. (NYSE:JPM)’s involvement in this case will tarnish the bank’s reputations. Not too long ago, it was the favorite of regulators. Bernard Madoff told Fox Business Network earlier this year that large banks including JPMorgan Chase & Co. (NYSE:JPM) knew that his brokerage firm was a Ponzi scheme. Madoff has also provided evidences that banks knew about his Ponzi scheme very well.
Looking at the magnitude of the criminal investigation, the bank and prosecutors are in talks about a deferred prosecution agreement. This agreement will allow JPMorgan Chase & Co. (NYSE:JPM) to pay a fine, and a few other concessions, to avoid facing criminal charges. Federal authorities may also ask the bank to hire an independent monitor.
JPMorgan’s national banking unit may be punished
However, the government may punish JPMorgan Chase & Co. (NYSE:JPM)’s national banking unit. The subsidiary has violated the Bank Secrecy Act, which requires banks to report any suspicious activity to the government. Sources said prosecutors are expected to clarify the action they will take by the end of this year. Authorities are also considering action against the bank employees who dealt with Bernard Madoff.
Authorities are likely to dig into a series of emails between Bernard Madoff and JPMorgan Chase & Co. (NYSE:JPM). The emails suggest that the banks continued working with Bernie Madoff despite knowing about his questionable business operation.
JPMorgan Chase & Co. (NYSE:JPM) shares were down 0.74% to $52.36 at 10:20 AM EDT.