JPMorgan $13 billion mortgage settlement expected Tuesday

According to Reuters, JPMorgan Chase & Co is expected to announce a $13 billion agreement with the U.S. government on Tuesday to settle claims it overstated the quality of mortgages sold to investors during the housing boom,

The civil settlement would mark the end of weeks of negotiations between JPMorgan Chase, the largest U.S. bank, and government agencies that were under pressure to hold banks accountable for wrongdoing that led to the housing crisis.

Even after the settlement, the bank faces at least nine other government investigations, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate.

For more information - JPMorgan $13 billion mortgage settlement expected Tuesday

Is the JPMorgan Settlement a Template for Other Bank Settlements?

J.P. Morgan Chase’s settlement is just a template for more settlements on Wall Street. According to an article at MarketWatch, the Justice Department is planning to use the reported $13 billion settlement with J.P. Morgan as a blueprint for other similar settlements. 

The deal to settle investigations by prosecutors into the firm’s issuance of bad mortgage investments to investors before the financial crisis could just be the start of many large settlements in the banking industry. The Justice Department plans to use a 1980s law which carries a lower burden of proof and gives prosecutors 10 years, instead of the standard 5 years, to pursue these cases. Some of the settlement money would have to go directly to struggling consumers, under the new model.

J.P. Morgan has been accused of selling troubled mortgage securities, many of which originated from its acquisitions of Bear Stearns and Washington Mutual. Almost every major Wall Street firm issued similar mortgage securities before the crisis and could become targets under this new approach by prosecutors. 

When the housing boom crashed five years ago, investors lost billions on their investments and the banks were accused of intentionally selling bad mortgages. Now five years later, banks, including Bank of America Corp. and Citigroup, have been saddled with ongoing litigation from the regulators, prosecutors, states and investors.

This switch in prosecution theories, which effectively extends the statute of limitations, will undoubtedly result in longer investigations, and more uncertainty for targets and potential targets of those investigations.

How the JPMorgan deal could curtail credit

The Justice Department's potential $13 billion settlement with JPMorgan may go a long way toward appeasing consumers' anger at big banks for the financial crisis, but it probably won't help those same consumers get a mortgage. In fact, it may make it harder.

For more information - How the JPMorgan deal could curtail credit

 

Previously Unknown Inside Traders in Heinz Settle SEC Charges

The Securities and Exchange Commission announced that two brothers in Brazil have agreed to pay nearly $5 million to settle charges that they were behind suspicious trading in call options for H.J. Heinz Company the day before the company publicly announced its acquisition.

The SEC filed an emergency enforcement action earlier this year to freeze assets in a Swiss-based trading account used to reap more than $1.8 million from trading in advance of the Heinz announcement.  The SEC’s immediate move the day after the announcement ensured the illicit profits could not be released out of the account while the investigation into the then-unknown traders continued.

In an amended complaint filed today in federal court in Manhattan, the SEC alleges that the order to purchase the Heinz options was placed by Rodrigo Terpins while he was vacationing at Walt Disney World in Orlando, and the trading was based on material non-public information that he received from his brother Michel Terpins.  The trades were made through an account belonging to a Cayman Islands-based entity named Alpine Swift that holds assets for one of their family members.  Rodrigo Terpins purchased nearly $90,000 in option positions in Heinz the day before the announcement, and those positions increased dramatically by nearly 2,000 percent the next day.

The Terpins brothers and Alpine Swift, which has been named as a relief defendant for the purposes of recovering ill-gotten gains, have agreed to disgorge the entire $1,809,857 in illegal profits made from trading Heinz options.  The Terpins brothers also will pay $3 million in penalties.  The settlement is subject to court approval.

For more detail, visit SEC.gov | Previously Unknown Insider Traders in Heinz Agree to $5 Million Settlement

JP Morgan Chase In $11 Billion Settlement Talks.

According to Reuters, JPMorgan Chase & Co is in talks with government officials to settle federal and state mortgage probes for $11 billion.
The sum could include $7 billion in cash and $4 billion for consumers.  The discussions include the U.S. Department of Justice, the Securities and Exchange Commission, the U.S. Department of Housing and Urban Development and the New York State Attorney General, the sources said.

For more information, see JPMorgan in talks to settle government probes for $11 billion: sources

Related articles

• JP Morgan to remain afloat after paying federal laws violations settlement
• Major Firms to be Sued over Libor Manipulation

London Whale Supervisor Arrested

Spanish police arrested former JP Morgan Chase trader Javier Martin-Artajo on Tuesday as he prepares to fight possible extradition to the United States over a $6.2 billion financial scandal at the United States' largest bank. The arrest came after the United States charged Spaniard Martin-Artajo and a junior colleague, Frenchman Julien Grout, with wire fraud and conspiracy to falsify books and records related to the trading losses

For more detail see - JPMorgan's former 'London Whale' supervisor arrested in Spain

Two JPMorgan Employees Face Criminal Charges in the London Whale Case

The "London whale" trading scandal that forced JP Morgan to book a $6.2 billion loss took a new turn on Wednesday as U.S. authorities announced criminal charges against two of the bank's employees.

US charges two in JP Morgan 'whale' case - NBC News.com

JP Morgan Facing Criminal and Civil Charges For Mortgage Security Fraud

On the heels of the announcement of charges against Bank of America for fraudulently selling investors mortgage backed securities, JPMorgan Chase disclosed on Wednesday that it faced a criminal and civil investigation into whether it sold shoddy mortgage securities to investors in the run-up to the financial crisis,

According to the New York Times, JPMorgan has acknowledged fthe existence of the investigation — one of several mortgage-related problems looming for the bank — in a quarterly regulatory filing. It said that the civil division of the United States attorney’s office for the Eastern District of California, has “preliminarily concluded” that JPMorgan flouted federal laws with its sale of subprime mortgage securities from 2005 to 2007. The parallel criminal inquiry, according to one person briefed on the matter, is in a more preliminary stage.

Adding to scrutiny of the bank, the NYT is also reporting that federal prosecutors in Philadelphia are examining whether JPMorgan duped investors into buying troubled mortgage securities that later imploded, The prosecutors are investigating whether JPMorgan churned out the mortgage-backed securities without ensuring that the investments met underwriting standards,

Representatives for the bank and the federal prosecutors declined to comment.

For more information - JPMorgan Reveals It Faces Criminal and Civil Inquiries
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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the representation of individual and institutional investors who have been defrauded. We represent investors, financial professionals and investment firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or at email us

JPMorgan's Big Loss: Explain it to Me

JPMorgan announced last week that it lost 2 billion dollars over the past six weeks. The local newspapers and talking heads made a huge deal about it. After all, it is 2 BILLION dollars, and the implied worries that the bank will go under, the economy will collapse and there were will be general mayhem abound.
However, that loss will not crash the bank, or anything else. According to the real money media, JPMorgan has more assets than any other bank in the country. Its net loss for the quarter is estimated to be $800 million and the bank made $5.4 billion in the first three months of the year alone.

But 2 billion dollars is a lot of money, and one has to wonder how in the world any one, or any financial institution, could lose that much money in a month. According to CNN Money and the Wall Street Journal, it is all caused by huge hedging transactions in credit default swaps. You remember them, they played a large part in the collapse in 2008 and 2009. According to the press, the credit default positions were so large that they caused unusual market movements, prompting hedge funds to take the opposite position.

So far, no one is saying that anyone did anything wrong, but we will have to wait and see on that one. But the back story is interesting, and starts at CNN Money - JPMorgan's big loss: Explain it to me 

Did JP Morgan Get a Break in CDO Case?

The SEC has filed a complaint against JPMorgan Securities for failing to disclose a material fact in connection with the creation, sale and distribution of a product. We commented on it earlier this week - JP Morgan to Pay $153.6 Million to Settle SEC Charges. In essence, the Commission alleged that JP Morgan failed to inform investorsin a CDO that it created that a hedge fund helped to select the assets in in the CDO portfolio, and the hedge fund was short those same assets. As a result, according to the SEC, the hedge fund was poised to benefit if the CDO assets defaulted.

The allegation was familiar, since the Commission brought almost identical charges against Goldman Sachs last year. We discussed that case at SECLaw.com -The Impact of the SEC CDO Fraud Complaint against Goldman Sachs and here - Goldman's Defense to SEC Fraud Case

JP Morgan settled by paying $153.6 million (and no executives were harmed in the settlement). Goldman initially fought the case, and ultimately settled for $550 million.

Now commentators are questioning the disparity between the two penalties. Bloomberg's Jason Weil writes that JP Morgan caught a break. Aside from the money, the charges against JP Morgan were for negligence, the charges against Goldman Sachs were for fraud.

Without knowing the intimate details of the two cases, if there was a difference in the scienter, or intent, part of the violation, then that would explain the disparity in the fine. Also, as litigators are well aware, defendants often get a better deal settling early.

But that doesn't explain the signficant difference in the fines, nor does it explain why there was no individual at JP Morgan included in the sanctions, whereas individuals were included in the Goldman Sachs case.

Bloomberg says that the SEC won't explain the disparity, but also notes that the Commission will have to have the approval of United States District Judge Richard Berman before the settlement is effective. If Judge Berman asks, the SEC will be forced to explain.

JPMorgan Gets a Break Where Goldman Got Nailed: Jonathan Weil - Bloomberg