Working through a long list of legal problems, JPMorgan Chase is starting the new year with another steep payout to the government.
The bank plans to reach as soon as this week roughly $2 billion in criminal and civil settlements with federal authorities who suspect that it ignored signs of Bernard Madoff’s Ponzi scheme, according to people briefed on the case.
All told, after reaching the Madoff settlements with federal prosecutors in Manhattan and regulators in Washington, the bank will have paid some $20 billion to resolve government investigations over the last 12 months.
JPMorgan’s Madoff settlements, the people briefed on the case said, would also involve a so-called deferred prosecution agreement, a criminal action that would essentially suspend an indictment as long as JPMorgan acknowledged the facts of the government’s case and changed its behavior. The agreement, nearly unheard-of for a giant American bank and typically employed only when misconduct is extreme, underscores the magnitude of the case against JPMorgan.
Under the terms of the deals, the bank will pay more than $1 billion to the prosecutors in Manhattan and the remainder to the Office of the Comptroller of the Currency and a unit of the Treasury Department investigating broader breakdowns in the bank’s safeguards against money laundering. The government plans to earmark some of the payout for Madoff’s victims, according to the people briefed on the case.
JPMorgan at one point discussed a so-called tolling agreement with prosecutors that would essentially extend the five-year legal deadline for bringing a case, one person said. The deadline might have otherwise expired late last year.
JPMorgan declined to comment but has publicly maintained that “all personnel acted in good faith” in the Madoff matter.
Despite serving as painful reminders of JPMorgan’s ties to Madoff — it was his primary bank for more than two decades — the settlements would enable the bank to put another investigation behind it. The expected deal comes on the heels of JPMorgan’s payment of a record $13 billion to the Justice Department and other government authorities over its sale of troubled mortgage securities in the period leading up to the financial crisis.
The payouts reflect a new conciliatory stance at JPMorgan. There is growing impatience among executives who worry that the scrutiny distracts from its record profits. People close to the bank say JPMorgan is keen to regain its credibility and is resigned to pulling out the checkbook to do so.