JPMorgan Chase & Co. may soon pay about $2 billion, according to a person familiar with the matter, to settle investigations into its dealings with Bernard Madoff, the notorious fraudster whose epic Ponzi scheme collapsed five years ago.
The payout would come as the ink dries on a landmark $13-billion settlement the New York company struck with state and federal authorities in late November. That settlement -- the largest ever paid by a single company to the government -- involved shoddy mortgage investments sold by JPMorgan as well as by two troubled banks it acquired during the housing meltdown in 2008.
JPMorgan's looming Madoff settlement centers on breakdowns in its compliance systems, and how the bank failed to alert U.S. authorities about suspicious activity in Madoff's accounts at the bank. Financial institutions are required by law to have sufficient checks in place to detect questionable transactions and report them to the government.
The office of Preet Bharara, the U.S. attorney in Manhattan, and the Office of the Comptroller of the Currency have been investigating JPMorgan's dealings with the bank. JPMorgan has said in regulatory filings it is cooperating with the probes.
A deal with Bharara's office would come in the form of a so-called deferred prosecution agreement, an unusual criminal penalty but one that stops short of requiring JPMorgan to plead guilty, according to the person familiar with the negotiations, who was not authorized to speak publicly.
The deal could be finalized by year's end, the person said. Under such an arrangement, the bank would likely stipulate to alleged facts in the case and would be forced to prove it has improved its compliance systems over a number of years.
News of the deal was earlier reported by The New York Times and Wall Street Journal.-- MCT