WASHINGTON Feb 10 (Reuters) - The non-profit group Better Markets filed a lawsuit against the Justice Department on Monday to block what it called an "unlawful" $13 billion settlement with JP Morgan over bad mortgage loans sold to investors before the financial crisis.
The record settlement with the bank, which was reached in November, does not release JP Morgan from potential criminal liability over the mortgages it packaged into bonds.
But Better Markets said it was still appalled that the settlement gave the bank "blanket civil immunity" for its conduct without sufficient judicial review.
"The Wall Street bailouts were bad enough, but now taxpayers are being forced to accept a secretive backroom deal that may well have been another sweetheart deal," said Dennis Kelleher, the chief executive of Better Markets.
"The Justice Department cannot act as prosecutor, jury and judge and extract $13 billion in exchange for blanket civil immunity to the largest, richest, most politically connected bank on Wall Street."
The lawsuit was filed in federal court in Washington.
The Justice Department in November negotiated a wide-ranging deal with the largest U.S. bank that included a $2 billion civil penalty to resolve Department of Justice claims.
It also included a $4 billion consumer relief package, and a separately negotiated $4 billion settlement with the regulator of Fannie Mae and Freddie Mac.
Another $1.4 billion of the $13 billion package also resolved a lawsuit from the National Credit Union Administration.
The DOJ settlement was released to the public but not filed in federal court.
The agency also did not release a complaint that it had prepared to file against JPMorgan before it negotiated the deal.