Is JPMorgan’s Madoff Settlement a Warning to Banks?

REPLAY VIDEO
Your next video will start in
Pause

Recommended Videos

  • Info

  • Comments

  • VIDEO TEXT

Jan. 7 (Bloomberg) -- Bloomberg News’ Keri Geiger and Jennifer Arlen of New York University School of Law, discuss JPMorgan’s $1.7 billion settlement to resolve claims that it played a role in facilitating Bernie Madoff’s ponzi scheme on Bloomberg Television’s “Market Makers.”

Amount to a much jp morgan has admitted.

It looks like jpmorgan had concerns that bernie made off was running internally.

They were saying the returns are too good to be too.

All that good stuff.

They failed to escalate that you proper regulatory authorities.

Are they required too?

Yes.

All banks have to have a very have the they compliance program.

Know your clients.

In failing to do that, it cost them $1.7 billion.

The money is going where?

According to the southern district, it will be going to made off -- madoff victims.

We do not have any details on that right now.

Has jp morgan commented on this at all?

They said this is jamie dimon just wanting to start 2014 with a clean slate eared they may not be as culpable as it sounds.

We cannot go through the ringer anymore.

We have arty pay the 13 billion fine at the end of last year.

Have you heard anything from the company?

I have not spoken to the company.

That is definitely the sentiment for jp morgan.

They want to get these things settled.

They want to get onto reporting record earnings as they have in the past.

There are a lot of things outstanding for them to settle.

That may be the case.

There is more to come.

There is incriminating evidence here.

There are e-mails but established wrongdoing.

Absolutely.

They have signed a deferred prosecution agreements.

They admitted to criminal activity.

The first thing in america to do that.

This is jp morgan's second.

A signed one in 2011. this is a big deal for them.

Admitting to criminal charges, not a lot of things to that.

Have they retrieved the e- mails?

Are they going through this process with the regulators who should have been regulating madoff?

I can only hope they are taking as close a look as internal employees at made off -- madoff clients.

Hoppe was opinion does want to hate on banks right now.

They are the ones taking a hit.

People have been charged criminally, individuals.

I have a hard time walking down the street of new york seeing ruth madoff taking her kids off to school.

The bank is to blame.

We do not know if they'll go after individuals.

Absolutely.

Individuals with targets can come out at any time.

We saw that with another case.

Two people were charged criminally.

I want to get more.

She joins us now.

What is your take on this?

I agree with you that jpmorgan is definitely trying to put this behind it.

I also think that a deferred prosecution agreement is the right approach in this case.

I have seen some coverages suggesting that maybe it is a problem to not actually convict them.

Is this all about too big to ja il?

I think that is a miss understanding of corporate and criminal liability.

When we say jp morgan committed this crime, it did not.

No publicly held firm commits a crime.

Why does it jp morgan want to call out its employees?

Couldn't they say we have a few bad apples in here?

For several reasons.

It may not want to encourage those employees to go to the government to cooperate and then bring in new evidence.

In these type of cases, i am normally an individual liability hawk.

I am concerned when i see no individual charges.

Normally i think you should bring them.

The bank secrecy act and these laundering charges are different.

What is a little troubling about this as a crime is that the people who allegedly committed this crime, the individuals who would have had to have committed it for the bank to be viable, they did not actually help madoff committed the crime.

They may not have even known he committed the crime.

They just knew it was too good to be true.

When you take the series of it, you have to know your clients.

I worked at a bank for 14 years.

You have to understand your clients.

They are culpable on some level.

That is the reason you take the exams.

Like i read.

-- i agree.

Would you be as confident if you were the u.s. attorney that a jury would want to send someone to prison for failing to fire a report, particularly if the jury is likely to think what i think was that if they had added this report to the 200,000 reports a year they foul, i suspect the government would not have done anything.

The ftc did not do anything.

It is a little troubling to send someone to jail for that.

Are you saying he has it is difficult to charge an entity with wrongdoing that there should not be terminal allegations against jp morgan?

I do not think it is because it is difficult.

I think the o.p.s. foremost cried -- i think the focus for most crimes should be on the individual.

The entity has responsibilities.

If there is criminal wrongdoing by the individuals in the banks, the prosecutors will find it and charge them.

They're highly motivated to do this.

They can go after the bank easier because the burden of proof is lower for an institution.

If they are going through hundreds of thousands of e-mails and documents, they can find criminal wrongdoing and they will charge people.

They have done that.

They do not like cases like this where it is disbursed.

If you look with a bring individual charges, it tends to be insider trading cases where there is one person who commits a crime that is not part of an organizational decision.

You can often find clear evidence against this person.

Here the responsibility for reporting is likely to be diffuse.

Someone may have had a suspicion and consultant with someone else.

This is not aiding and abetting.

It is failing to fire out a report.

I could see the government being nervous that a jury would it persist.

Could only say it is too good to be true?

Yes.

Couldn't they have said this is too good to be true russian mark?

They lost billions of dollars.

In the end they paid the price.

They are getting their homeboys and saying this is fantastic.

Good and anyone asked the question before we said these are victims?

We have met lots of investors that have said i'm not going anywhere near the guy with the bargepole.

There are holes in their compliance program.

That is a lot of what they are here.

What in their program is not looking?

Is it a shake down?

It is not a shakedown.

I think what you are seeing is a big shot across the bow of all of the banks saying we have had the statute on the books for a long time.

You all have not done the level of compliance that would have taken to really make sure.

We are now coming after the banks, saying if you are getting hit with a $100 million penalty, think again.

If you look at hsbc, it ratcheted up compliance by nine full.

It was spinning $240 million a year as a result of trying to bring this up.

It is saying we want you spending real money on compliance.

That only works if the government can do something with the information.

That means congress has two funds the kind of big data effort it would take to go through these reports.

There is not enough dough to do this.

Investors have not said we are seeing the stock go down.

They are backed into a corner.

Jpmorgan and the other banks are not getting back to a fighting position anytime soon.

It is hard to know where it will end.

We know there are multiple cases against jp morgan.

If we could see the horizon, maybe before the new year they were settling things at a fairly rapid clip.

Can we be confident that investigators at the fbi continued to do what kerry says which is go through the e-mails in an effort to establish individual culpability?

Once we see a settlement, is the inclination to wash our hands of it and say one point $7 billion, let's move onto the next target.

Is in some cases they do go through there.

They also do have jp morgan in the crosshairs on the issues of foreign bribery in china.

They have to decide where to target their resources.

If they hire the person it is much less a diffuse.

If that is foreign bribery, that is an affirmative crime.

While this is a crime, it is dell your to prevent a harm, not the preventing -- not because of of a harm.

If i have limited resources, i would target individuals who caused harm.

We have limited time.

We will have you back.

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change