Suit ties JPMorgan Chase to Madoff scheme
Related mediaThe Madoff family
Executives at JPMorgan Chase, Bernard Madoff's primary banker, had concerns for years that the financier was running a Ponzi scheme but didn't do anything to stop it, the trustee for the financier's victims contends in a $6.4-billion suit made public Thursday.
The suit contends that officials at the bank, which handled "billions" of dollars in Madoff's money and made at least a billion dollars from Madoff victims, were warned by its employees and others in "blunt terms" about speculation that Madoff was running a Ponzi scheme, lawyers for trustee Irving Picard said in a statement.
Deborah Renner, one of Picard's lawyers, contended that the bank appeared to have been concerned only with protecting its own investments in Madoff's funds. "As we allege in the complaint, [JPMorgan Chase] had a palpable concern that Madoff was a fraud for years, but it was not until October 2008 that it reported Madoff to government officials."
Even then, Renner said, bank executives did not restrict the Madoff bank account, even though it was being used to launder money from the Ponzi scheme. He was arrested two months later.
The bank, headquartered in Manhattan, Thursday denied any wrongdoing.
"Contrary to the trustee's allegations, JPMorgan did not know about or in any way become a party to the fraud orchestrated by Bernard Madoff," spokeswoman Jennifer Zuccarelli said in a statement e-mailed to Bloomberg News. "Madoff's firm was not an important or significant customer in the context of JPMorgan's commercial banking business, and the revenues earned from Madoff's bank account were modest and entirely consistent with conventional market rates and fees."
The suit, filed in December in U.S. Bankruptcy Court, includes quotations from internal e-mails at the bank and contains "substantial detail supporting allegations that JPMorgan Chase knew or should have known that Madoff was likely engaging in fraud," Picard's lawyers said.
According to the suit, a bank officer in 2007 sent an e-mail to colleagues, saying that another bank executive "just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme."
Picard said in the suit that JPMorgan's "drive for fees and profits became a substitute for common sense, ethics and legal obligations."
One of Madoff's victims, Judith Welling of Manhattan, said she and her husband, Dewitt, both now retired, lost well over $1 million to the scheme and were not surprised at the lawsuit's allegations against JPMorgan. "My husband and I often said it was impossible that there was so much money - billions - sitting there and that someone didn't know."
Madoff, now 72, pleaded guilty on March 12, 2009, to charges that his investment adviser business was a massive fraud. He was sentenced to 150 years at a federal prison in North Carolina.
The suit had been filed under seal on Dec. 2 in federal bankruptcy court in Manhattan, seeking to recover nearly $1 billion in fees and profits and an additional $5.4 billion in damages for what Picard accused JPMorgan Chase of "aiding and abetting Madoff's fraud."
The suit had been under seal because JPMorgan Chase had contended that information it had provided to Picard in the probe was confidential. Now, lawyers for Picard say the two sides have agreed to unseal most of the complaint.