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JPMorgan, Barclays, S&P, Argentina, Amazon: Compliance

An Indianapolis church sued JPMorgan Chase & Co., accusing the bank of fraud, self-dealing and mismanagement of its trust accounts.

The Christ Church Cathedral claimed the world’s fourth-biggest bank selected unsuitable and poorly performing investments to further its own financial interests and, as a result, breached both state and federal securities laws.

The bank “caused the church trusts to lose approximately $13 million in value as a result of JPMorgan’s decisions to purchase over 177 different investment products, mostly from itself, using church funds,” from July 2004 to December 2013, the plaintiffs said in the complaint filed yesterday.

The trusts were endowed by the descendants of drug company founder Eli Lilly.

The lawsuit came five days after Bloomberg News, citing a person briefed on the matter who asked to remain anonymous, reported that the U.S. Securities and Exchange Commission is reviewing whether conflicts of interest led JPMorgan to sell certain investment products to individual clients.

Kristen Chambers, a spokeswoman for the New York-based bank, declined to comment on the church lawsuit.

The case is Rector, Wardens and Vestrymen of the Christ Church Cathedral of Indianapolis v. JPMorgan Chase & Co., 14-cv-01331, U.S. District Court, Southern District of Indiana (Indianapolis).

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Compliance Action

U.S. Banks Said to Get Enforcement Letters in FX-Rigging Probes

Banks including JPMorgan Chase & Co., Citigroup Inc. and Morgan Stanley have been notified that regulators are preparing enforcement actions on currency rigging, people familiar with the investigation said.

Talks are progressing between banks, the U.S. Federal Reserve and the Office of the Comptroller of the Currency to settle investigations into alleged manipulation of foreign-exchange markets, according to two people who asked not to be identified because the discussions are private. Some firms have received so-called 15-day letters outlining the agencies’ findings and warning that enforcement actions are likely, the people said.

Enforcement actions can range from cease-and-desist orders to fines to banning bankers from the industry. The letters typically detail the investigators’ findings and give recipients about 15 days to offer a written defense. Such notices usually open a final stage of settlement negotiations.

U.S. regulators are coordinating with the U.K.’s Financial Conduct Authority to settle some of the probes by November, according to two people. The FCA is in settlement talks with firms including Barclays Plc, Citigroup, HSBC Holdings Plc, JPMorgan, Royal Bank of Scotland Group Plc and UBS AG. It scheduled meetings with some banks for as soon as next month to discuss penalties, the people said.

A few investigations are taking longer, and talks with firms such as Bank of America Corp. and HSBC haven’t progressed as far, according to some of the people.

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Corinthian Subpoenaed for Records on Student Outcomes, Debt

Corinthian Colleges Inc., the for-profit chain in the process of selling or shutting its campuses, received a federal grand jury subpoena seeking records on student-loan defaults and job placement.

The Aug. 8 subpoena also seeks information on graduation rates, the transferability of student credits and marketing materials, according to a regulatory filing yesterday.

Corinthian, which served about 72,000 students as of last month when it agreed to a government plan to shut down or sell its 107 campuses, is facing allegations in multiple states of falsifying job placement and marketing data. The Santa Ana, California-based company is evaluating the subpoena and intends to cooperate fully with the request, according to the filing.

Corinthian’s downfall accelerated in June when the U.S. Education Department imposed a 21-day waiting period for it to draw on the federal student aid that accounts for almost all its revenue.

“There can be no assurance that the company will be able to obtain any such additional needed liquidity on a timely basis, on terms acceptable to it, or at all,” Corinthian said in yesterday’s filing.

Barclays Seen Facing $2 Billion More in 2014 Conduct Charges

Barclays Plc faces costs of as much as 1.2 billion pounds ($2 billion) for its alleged rigging of currency markets, lying to clients about its U.S. dark pool and mis-selling interest-rate swaps, Sanford C. Bernstein Ltd. said.

The U.K.’s second-largest lender may incur a 700 million-pound charge to settle a foreign-exchange probe with regulators and a further 200 million pounds relating to a U.S. investigation into its private-trading venue, Chirantan Barua, an analyst at Bernstein in London, said in a note yesterday. The bank might reach settlements by the end of 2014, he said.

Barclays is part of a group of banks in talks with the U.K.’s Financial Conduct Authority to reach a settlement in the currency-rigging probe, while fighting a U.S. lawsuit accusing it of falsifying marketing materials to hide the presence of high-frequency traders in its dark pool.

The scandals are undermining Chief Executive Officer Antony Jenkins’s attempts to reform the culture of a bank after it was fined 290 million pounds in 2012 for rigging the Libor benchmark interest rate.

London-based Barclays may also set aside 300 million pounds in the second half to compensate customers improperly sold interest-rate hedging products, Barua estimates. The bank didn’t make further provisions for redress in the first half.

Other British lenders are also struggling with rising provisions for misconduct. Royal Bank of Scotland Group Plc, Britain’s largest state-owned lender, may face as much as 1 billion pounds in charges to settle the allegations of currency market manipulation, Barua wrote in an separate Aug. 11 report.

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Lawsuit News

S&P Accuses U.S. of Withholding Documents in Fraud Lawsuit

The U.S. is withholding documents that might show the government sued Standard & Poor’s for fraud in retaliation for downgrading the country’s debt, the ratings company said in a court filing this week.

In April, a federal judge ruled that S&P could seek potential evidence from the Justice Department. Since then, the government has turned over documents with redactions ranging from the omission of a single word on a page to multiple pages, S&P said in court documents filed Aug. 12 seeking to compel production.

The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

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Paul Singer Gets OK to Follow Argentina Money Trail to Nevada

Billionaire Paul Singer, the hedge fund founder seeking to collect on more than $1.5 billion in judgments over Argentina’s defaulted bonds, may search Nevada for some of that money, a judge ruled.

Singer asked a Las Vegas court in April to order 123 companies in Nevada to turn over information about assets belonging to Argentine businessman Lazaro Baez, who is accused in that country of embezzling $65 million from government contracts. U.S. Magistrate Judge Cam Ferenbach in Reno granted that request Aug. 11, ruling that Singer’s hedge fund was attempting to execute a valid judgment against Argentina.

“There is no doubt that the 123 companies are shell corporations,” Ferenbach said in an order. “Similarly, there is no doubt that shell corporations are routinely formed to commit fraud.”

Singer’s decade-long quest to recoup on investments in Argentina’s debt peaked last month when the country went into default for the second time in 13 years after talks broke down with some creditors. Singer leads a group of hedge funds owed more than $1.5 billion from the country’s 2001 default. A federal judge in New York barred Argentina from paying on restructured debt until it satisfies Singer’s group.

In his order, Ferenbach wrote that Argentina’s failure so far to satisfy judgments won by Singer’s NML Capital has caused the company to “travel the globe in search of property owned by Argentina.”

The case is NML Capital Ltd. v. Argentina, 14-00492, U.S. District Court, District of Nevada (Las Vegas).

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Amazon’s Prices Seen Holding Regulators at Bay in Hachette Spat Inc.’s treatment of customers means more to U.S. antitrust authorities than how the largest Web retailer pressures publishers and movie studios.

Typically it’s seen as a good thing for a retailer to pressure suppliers to trim prices, as that can lead to better deals for shoppers, David Balto, a former policy director at the Federal Trade Commission, said in an interview with Bloomberg News.

“The antitrust cops clearly would be on Amazon’s doorstep” if it was also pushing those suppliers to charge competing retailers more, he said. Successfully going after Amazon at this stage “would be breaking new territory under the antitrust laws.”

That hasn’t damped debate about the tactics Chief Executive Officer Jeff Bezos is using against Hachette Book Group, Walt Disney Co. and film studio Warner Bros. The question is whether he’s pushing Amazon toward the same monopolistic territory that tripped up Microsoft Corp., Standard Oil and AT&T Inc.

“They are getting very close to the line,” said Joseph Tabacco, a former senior trial lawyer at the Justice Department who has worked on federal monopoly and price-fixing cases against mining, electronics and pharmaceutical companies.

A phone call left at Seattle-based Amazon’s press office wasn’t immediately returned.

Amazon, the world’s largest Web retailer, commands 60 percent of the U.S. e-book sales, a market that is projected to jump almost sevenfold to $8.6 billion as demand for paper books falls, according to Forrester Research Inc.

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