Bharara Says JPMorgan Deal Sends Message on Compliance

, New York Law Journal

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U.S. Attorney for the Southern District Preet Bharara speaks at a press conference on the JPMorgan settlement.
U.S. Attorney for the Southern District Preet Bharara speaks at a press conference on the JPMorgan settlement.

JPMorgan Chase Bank is paying the price for its role as the banker for Bernard Madoff's multi-billion dollar Ponzi scheme.

The nation's largest bank and Southern District U.S. Attorney Preet Bharara on Tuesday announced a $1.7 billion forfeiture and a two-year deferred prosecution agreement for violating two counts of the Bank Secrecy Act—a settlement Bharara hailed as sending a critical message about compliance to banks on reporting requirements (See Agreement).

The $1.7 billion represents the largest forfeiture by a U.S. bank and the largest Department of Justice penalty for a Bank Secrecy Act violation, the government said.

In addition, the bank will have to pay a $350 million civil fine to the Office of the Comptroller of the Currency.

People at JPMorgan saw a number of red flags over the years, Bharara said at an afternoon press conference, but failed to take action or file, as required by the act, "suspicious activities reports" concerning Bernard L. Madoff Investment Securities LLC.

"It's not a tip," Bharara said of compliance with the act. "It's not a suggestion. It's a legal requirement."

"To be sure, there were failures by lots of people, in lots of places outside the bank," he said, but the reason for requiring the reports under the act is to alert regulators and investigators and stop a crime in progress.

"The victim's of Bernard Madoff's epic fraud are $1.7 billion closer to being made whole," he said.

Madoff was arrested on Dec. 11, 2008, at a time when he had 4,000 client accounts and claimed to have a balance of $65 billion that turned out to be a mere $300 million.

He pleaded guilty on March 12, 2009 to securities fraud, money laundering, wire fraud and other related offenses. Judge Denny Chin later sentenced him to 150 years in prison.

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