It’s only the first week of January and already it’s an expensive year for giant bank JPMorgan Chase. Just blame Bernie Madoff.
The New York Times’ Dealbook blog reports that Chase is near to settling a $2 billion deal relating to Madoff’s pyramid schemes. The gist of the suit is that JPMorgan Chase, Madoff’s bank of choice, should have known something fishy was going on with Madoff’s investments and more or less chose not to notice the giant pile of fraud.
Banks are required by the Bank Secrecy Act, a federal law, to maintain internal checks against money laundering and to report suspicious transactions. Evidence points to Chase noticing but neglecting to report Madoff’s activity, including an internal e-mail from an employee in 2008 saying that an executive, “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
Madoff — whose transactions were indeed highly suspicious, as the world now knows–was arrested in 2008 and in 2009, pled guilty to a pile of felonies. He is currently serving a 150-year prison term.
According to the NYT, part of the cash will be used to reimburse the victims of Madoff’s scheme, investors who lost millions. The NYT also reports that the settlement involves a deferred prosecution agreement, which is basically an agreement that keeps the bank from being indicted on criminal charges if it acknowledges the facts of the case and changes its behavior going forward. No individual bank executives have been named in the suit.