Once renowned as one of the most reputable firms on Wall Street, JPMorgan has lately been spending more time dealing with legal rather than financial matters.
According to its most recent quarterly earnings report filing with the U.S. Securities and Exchange Commission, no fewer than 43 major cases classified as “material” litigation are currently open against JPMorgan. They range from the bank’s involvement in the Bernie Maddoff case, to its role trading mortgage-backed securities, which ultimately contributed heavily to the financial crisis of 2008.
Of course, the so-called “London Whale” case that resulted in $6 billion in losses for the bank is getting most of the attention, with news this week that the financial powerhouse may settle with U.S. and UK regulators for about $600 million. And there’s also last week’s headline grabbing story that there is an inquiry into potential bribery charges stemming from hiring practices in its Chinese offices.
But other allegations against the bank span from fraud to breaching both its contracts and its fiduciary duty, among many other charges. According to SEC documents, JPMorgan estimates its combined legal losses could be as much as $6.8 billion — possibly more if unforeseen damages are brought this year. What’s more, the firm’s annual legal costs over the last two years have been about $4.9 billion each year.
So, why aren’t investors outraged? Well, maybe it has to do with the fact that last quarter — the same one in which all these lawsuits were detailed — JPMorgan posted a profit of nearly $6.5 billion in the first six months of the year. What’s a little (or a lot of) legal trouble when you are minting that kind of money for investors, right?
Still, outlined below are 12 of the major cases pending against JPMorgan that could end up eating into its bottom line. Maybe then investors will take notice.
1. “Bear Stearns Hedge Fund Matters”
When JPMorgan bought the failing Bear Stearns in 2008, it inherited legal troubles — and created some anew — that continue even today. Among them: mismanagement of various credit funds and an action brought by Bank of America seeking $540 million that alleges breach of contract, fraud, and breach of fiduciary duty regarding collateralized debt obligations with holdings purchased by BofA from the funds.
2. Other Bear Stearns Matters
More Bear Stearns troubles, this time in the form of various shareholder class action lawsuits regarding purchases of subprime loans and repurchases of stock, as well as insider trading.
3. Mismanagement of its Chief Investment Office
JPMorgan is facing various class action lawsuits regarding alleged mismanagement of its Chief Investment Office, which resulted in losses in both its retirement plans and among shareholders. One lawsuit claims the firm made false or misleading statements about the CIO’s role, risk management practices, and financial results, including the disclosure of losses to shareholders.
4. The City of Milan
In 2009, JPMorgan and other financial institutions faced a lawsuit from Milan, Italy, that alleged “fraudulent and deceitful acts” pertaining to a bond swap that was restructured several times. Two JPMorgan employees were found guilty and received prison sentences. The firm was found liable and was fined roughly $1.3 million, as well as ordered to return profits from the swap, which totaled about $32 million. The bank is appealing the verdict.
5. Credit Default Swaps
Another probe stemming from the financial crisis. This one includes four class action lawsuits, as well as an investigation by the Department of Justice brought against JPMorgan into its role in conspiring with other financial institutions to shutout exchanges in the trading of its CDOs to protect the banks’ revenues.
6. Enron Relationships
Currently, two lawsuits seek damages stemming from the firm’s banking relationships with Enron and its bankruptcy.
7. Intercharge Litigation
JPMorgan is also involved in a major lawsuit brought by a group of retail organizations. The plaintiffs accuse the bank of conspiring with Visa and other credit card companies to set fees and trying to secure an exclusive deal.
8. Bernie Madoff Ties
The bank is named as a defendant in a lawsuit seeking $19 billion in damages and accusing it of “aiding and abetting fraud, aiding and abetting breach of fiduciary duty, conversion, contribution and unjust enrichment in connection with Madoff’s Ponzi scheme.”
9. MF Global
Again, JPMorgan is alleged to have aided and abetted, this time in MF Global’s “alleged misuse of customer money and breaches of fiduciary duty,” as well as being “unjustly enriched by the transfer of certain customer segregated funds by MF Global.”
10. Mortgage-backed Securities
Several lawsuits are exploring JPMorgan’s various roles, including issuer, originator, and underwriter of mortgage-backed securities offerings, which led to the housing and larger economic crisis of 2008.
11. The Jefferson County, Ala. Bankruptcy
As part of a Chapter 9 filing by the county for bankruptcy, JPMorgan is listed as a defendant in the case alleging it made payments to third parties in exchange for being chosen to underwrite $3 billion in warrants issued to the county, and to act as a counterparty for certain derivative swaps.
12. Debt Collection and California
In May of 2013, the California Attorney General filed a civil suit against JPMorgan regarding the bank’s debt collection processes, including credit cards, mortgages, default motions, and judgment sales.