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Business, Finance, Occupation & Industry

U.S. Regulator to Fault JPMorgan Over Madoff Accounts

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By Reuters

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Stephen Chernin/Getty ImagesFinancier Bernard Madoff arrives at Manhattan Federal court in March 2009 for a sentencing hearing.

By Brett Wolf and Aruna Viswanatha

U.S. regulators plan to fault JPMorgan Chase, which served as Bernie Madoff‘s main bank for two decades, for failing to conduct adequate due diligence and report suspicious activity, according to a person familiar with the matter.

The Office of the Comptroller of the Currency is expected to issue a cease-and-desist order against JPMorgan, which will require the largest U.S. bank to put an end to the alleged failures in its anti-money laundering practices.

The timing of the order is uncertain but could come later this year, the source said. A fine isn’t expected. If the OCC isn’t satisfied with JPMorgan’s response, it can take harsher action against the bank, including financial penalties.

OCC spokesman Bryan Hubbard declined comment, as did JPMorgan spokeswoman Jennifer Zuccarelli.

Madoff was arrested in December 2008, pleaded guilty in 2009 to running a massive, decades-long Ponzi scheme, and is serving a 150-year prison sentence.

Irving Picard, a trustee for Madoff’s victims, has accused JPMorgan Chase & Co. (JPM) of ignoring warning signs that Madoff’s business was a fraud and has attempted to sue the bank. A judge has tossed out all but $425 million of Picard’s $19.9 billion lawsuit against JPMorgan. Picard is in the process of appealing the ruling.

JPMorgan has said there was no evidence showing that anyone at the bank knew of Madoff’s elaborate scheme. The bank did file a suspicious activity report in London two months before Madoff was arrested, describing his investment performance as “too good to be true,” according to Picard’s lawsuit.

The OCC will fault JPMorgan for treating Madoff and his related entities as low-risk customers, and find that the bank failed to heed red flags, such as funds being shuffled between accounts without clear business purpose, said the person familiar with the matter. As a result, “suspicious” transactions weren’t reported to authorities, said the source, who wasn’t authorized to speak publicly about the matter.

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The OCC in January ordered JPMorgan to tighten its risk controls and improve its anti-money laundering compliance. But the regulator separated that order from any action related to Madoff’s accounts, in a dispute with the bank over which documents it had to turn over as part of the inquiry.

The inspector general of the Treasury Department, which houses the OCC, has since ordered JPMorgan to work with regulators in the Madoff inquiry and rejected the bank’s argument that certain documents were protected by attorney-client privilege.

“The matter is still pending,” said Richard Delmar, counsel to the Treasury’s watchdog office.

JPMorgan has a recent history of tense relations with the OCC. A report released last month by a Senate investigative panel revealed

From: http://www.dailyfinance.com/2013/04/16/jpmorgan-bernie-madoff-scheme/

News, Politics, Government

Is JPMorgan Too Big & Complex To Manage?

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By Steve Denning, Contributor

A theory… may satisfy the politicians’ need for a villain or scapegoat, but such a theory offers no useful guide to the solution to the problem. Hyman Minsky (1986) JPMorgan Chase [JPM] has been in the news recently, and not in a good way. We learned this week that in July 2012, the Office of the Comptroller of the Currency (OCC) downgraded JPMorgan’s management performance from “satisfactory” to “needing improvement”. To put that news in context, the OCC rating, “needs improvement”, was the rating given during the financial crisis in 2008 and 2009 to Citigroup[C] and Bank of America [BAC]. At that time, many inside observers considered those two banks to have been insolvent. Last week, the Federal Reserve announced that it found weaknesses in the capital-management plan that JPMorgan had submitted for this year’s stress tests and was requiring the firm (along with Goldman Sachs [GS]) to resubmit later this year. And also last week, the Senate released its report on the “London Whale” debacle in which the unit supposed to be protecting the bank against trading risk (whose daily “value at risk” was $67 million) ballooned to a loss of more than $6 billion. The report found that “risk limits created by the bank to protect itself were exceeded routinely” and “bank executives misled investors and the public.” JPMorgan has said that it is working on “fixes”. But is the problem deeper? Is JPMorgan simply too big and complex to manage? Are all the big US banks to big and complex to manage? What should be done? …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Regulators to JPMorgan's Management: Shape Up!

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By Alex Dumortier, CFA, The Motley Fool

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Following two day of losses, stocks opened higher this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.57% and 0.53%, respectively, as of 10:05 a.m. EDT. The Cypriot crisis remains unresolved, but without direct evidence to support it, the notion of contagion to other Southern European nations may be losing its poignancy with U.S. investors.

Downgrading a Dimon
Dow component JPMorgan‘s main regulator, the Office of the Comptroller of the Currency, or OCC, downgraded the bank’s management rating last July from “satisfactory” to “needs improvement.” This tidbit was reported last week when the full results of big banks’ capital plans were released, but The Wall Street Journal published a story yesterday that unearths some of the details concerning this confidential process.

The OCC scores banks according to a framework that goes by the acronym CAMELS, wherein each letter stands for one facet of the bank’s condition (“M” stands for management). In a move that was relayed to JPMorgan on July 27 last year, the OCC lowered its management rating from two to three (on a scale of one to five). According to the OCC, a score of three indicates that “the capabilities of management or the board of directors may be insufficient” and that management and board performance “need improvement.”

The downgrade was partially — but not wholly — the result of the “London Whale” fiasco, which cost the bank roughly $6 billion in trading losses and unquantifiable (but substantial) reputational damage.  

What are the implications for JPMorgan shareholders? I continue to think JPMorgan’s management is first-rate — on par with that of Wells Fargo and Goldman Sachs. However, the latter two are not hybrids in the way a universal bank like JPMorgan is. Combining a huge investment bank and a commercial bank adds a layer of complexity to what are, separately, phenomenally complex organizations. “Too big to manage” is a genuine problem for any management, no matter how skilled.

“Too big to manage” may also help explain why big finance firms are still trading at deep discounts to their historic norms. Investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

var FoolAnalyticsData = FoolAnalyticsData || []; …read more
Source: FULL ARTICLE at DailyFinance