The Free Press, Mankato, MN

State, national news

January 7, 2014

JPMorgan settles Madoff fraud claims for $1.7B

NEW YORK (AP) — JPMorgan Chase & Co., already beset by other costly legal woes, has agreed to pay $1.7 billion to settle criminal charges accusing the bank of ignoring obvious warning signs of Bernard Madoff's massive Ponzi scheme, federal authorities said Tuesday.

The government said the $1.7 billion represented the largest ever bank forfeiture and the largest Department of Justice penalty for a Bank Secrecy Act violation. The settlement includes a so-called deferred prosecution agreement that requires the bank to acknowledge failures in its protections against money laundering but also allows it to avoid criminal charges. No individual executives were accused of wrongdoing.

The deal was announced by the office of U.S. Attorney Preet Bharara, who scheduled an afternoon news conference to detail the agreement to resolve criminal charges: two felony violations of the Bank Secrecy Act in connection with the bank's relationship with Bernard L. Madoff Investment Securities, the private investment arm of Madoff's former business.

Under the agreement, the criminal charges will be deferred for two years as JPMorgan admits to its conduct, pays the $1.7 billion to victims of Madoff's fraud and reforms its anti-money laundering policies, prosecutors said in a release.

JPMorgan didn't immediately comment on the settlement. It shares fell 55 cents to $58.45 in morning trading Tuesday.

The deal was similar to one reached in late 2012 with the British bank HSBC, which agreed to pay $1.9 billion to settle claims it laundered money for Iran, Libya and Mexico's murderous drug cartels. Some observers called the HSBC settlement — which included a $1.25 billion forfeiture and $655 million in civil penalties — an example of the government stopping short of bringing criminal charges against a big bank or its executives because such prosecutions could be devastating enough to cause the institution to fail.

JPMorgan was Madoff's primary bank in the later years of a multi-decade fraud that ended in 2008 when he revealed to the FBI that his investment advisory business was a Ponzi scheme.

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