Working through a long list of legal problems, JPMorgan Chase is starting out in 2014 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 L. 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.
A quick review from memory is that these fines against JPMorgan Chase have piled up over an assortment of criminal and civil infractions including mortgage fraud, securities fraud, lying to regulators, facilitating money laundering and a blind eye toward the scandal operated by a hugely successful fraud.
Pity the company shareholders who really bear the financial brunt of the crimes committed under the nose of their management team and board, which robs them of dividends, equity and market capitalization. But feel bad for yourself as well – U.S. taxpayers will be chipping in for part of the tab since an estimated 30% or so ($7 billion) will be deductible from the bank’s taxable income.
Will the size and scale of these fines change this bank’s behavior – and attitude – in the future? Are any other banks watching and will it alter their behavior? These are relevant questions to ponder in a year that the banking industry was labeled as the least trusted on the globe by Edelman’s Trust Barometer.
The former CEO of a very prominent insurance company, who cornered the market for credit default swaps, is reputed to have once said “pay the fine.” His message was that he would tolerate a lot of blatant illegal tactics in his company, because if they were discovered, the fine was lower than the profits earned.
Hopefully those days are long over – both in terms of attitude and profitability.