Dimon Says JPMorgan Managers May Have Misinformed Board on Risk
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said bank executives may have accidentally misinformed its board and regulators on risks in its chief investment office before the unit announced $2 billion in trading losses.
“To the extent that we were misinformed, we were misinforming them,” Dimon 56, said at a hearing today of the Senate Banking Committee in Washington. “It’s a little unrealistic to expect the risk committee to capture something like this.” He was referring to a three-member panel of the board designated to monitor risk-management.
The lack of financial expertise on New York-based JPMorgan’s risk committee has drawn criticism from shareholder advocates. The three directors on the panel include a museum head who sat on American International Group Inc. (AIG)’s governance committee in 2008, the grandson of a billionaire and the CEO of a company that makes flight controls and work boots.
The only member with any Wall Street experience, James Crown, hasn’t been employed in the industry for more than 25 years.
CEO Jamie Dimon was called to testify to the committee after saying May 10 that the firm’s chief investment office suffered a $2 billion loss trading credit derivatives. He later called it “a Risk 101 mistake.”
Shares of the bank fell 24 percent through yesterday since April 5, when Bloomberg News first reported that a trader in JPMorgan’s chief investment office was taking such large positions in credit-derivative indexes that he was distorting prices in the market.
At least half a dozen agencies, including the U.S. Department of Justice and the Securities and Exchange Commission, are investigating the timing of the bank’s disclosures about the losses and how risk-management systems failed to prevent them.
Crown, 58, who is president of Chicago-based Henry Crown & Co. and lead director of defense contractor General Dynamics Corp. (GD), is on the risk committee with Ellen Futter and David Cote. Futter, 62, is president of the American Museum of Natural History in New York, and Cote, 59, is CEO of Honeywell International Inc. (HON)
Futter’s re-election this year was opposed by Washington- based investor group Change to Win and shareholder advocate Glass Lewis & Co. over her previous experience on the boards of AIG and Bristol-Myers Squibb Co.
Futter headed the audit committee of Bristol-Myers, a New York-based drugmaker, during an accounting scandal that began in 1999 and that the company settled for $300 million to avoid criminal prosecution. She also served on AIG’s compliance and governance committees, resigning in July 2008 before the insurer took a $182.3 billion bailout from the U.S. government.
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