JPMorgan Chase & Co. (NYSE:JPM) faces a class-action suit from investors, with public pension funds named as lead plaintiffs, who allege that they suffered losses of about $52 million because the bank allegedly provided false information, thereby concealing the real nature of the trades that caused the massive trading loss at the bank.
U.S. District Judge George Daniels decided to consolidate the numerous suits against the bank into one class action, and named several pension funds as the lead plaintiffs: Arkansas Teacher Retirement System, Ohio Public Employee Retirement System, School Employees Retirement System of Ohio, State Teachers Retirement System of Ohio, and Oregon Public Employee Retirement Fund from the U.S., as well as Sjunde AP-Fonden from Sweden.
The trades that caused the massive trading losses, estimated in July by CEO Jamie Dimon as $5.8 billion, emanated from the bank’s London office, and were allegedly the handiwork of trader Bruno Iksil, also known as the ‘London Whale,’ for the size of his trades. These positions were taken in credit derivative instruments. We reported on June 17 that a Louisiana Police Pension fund and others had sued JPMorgan Chase & Co. (NYSE:JPM) over losses they suffered on their investments, due to the trading bungle at the bank, which were admitted by the bank on May 10.
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Meanwhile, it is a known fact that many pension funds are serial plaintiffs and enter a lawsuit at the drop of a hat. According to an article in Forbes, the Louisiana Municipal Police Employees’ Retirement System has filed 49 securities lawsuits during the past two years. Another, the Operating Engineers union, has probably filed more than 40 securities suits since 2003. According to the same article, it is ironical that given the volatility in the stock of JPMorgan Chase & Co. (NYSE:JPM) over the last two years, “anybody who bought and sold the stock over any period in the last two years was just as likely to have made money as to have lost it.”
And in the strange ways of working out losses in the class action suits, a lot depends upon the determination of the time “window” in which the losses occurred, and this could vary from lawyer to lawyer. And as long as you bought shares before a swindle occurred, and sold them after the scam was exposed, you became eligible to file a suit. Through cautious cherry-picking of trades, one could even suitably enhance the claimable losses.
So the court would have its work cut out to determine the reality of these “losses” incurred by these pension funds, who are supposedly long-term investors. In the light of the extent of their involvement in legal suits, at least some of these funds may be attempting to boost otherwise indifferent returns generated on their portfolios.
Additionally, pension funds cannot realistically reach their target of 8% turns per annum. If they win this lawsuit, it will be a big help to reach that goal!