By Emily Flitter
NEW YORK Dec 12 JPMorgan Chase & Co is
working with criminal and regulatory authorities on settlements
over the bank's relationship with convicted Ponzi schemer
Bernard Madoff, ones that would involve $2 billion in penalties
and a rare criminal action, according to sources familiar with
The settlements would fault the bank for turning a blind eye
to warning signs about Madoff's firm, which was revealed in
December 2008 to be the operator of a massive Ponzi scheme, the
One source said JPMorgan employees in New York, through
internal communications at the bank, expressed confusion about
details of Madoff's activity and his fund's returns, but the
bank decided not to file a suspicious activity report with U.S.
regulators, despite the fact that its London office had filed a
similar report with UK authorities.
JPMorgan spokesman Mark Kornblau declined to comment.
The criminal component to the case was first reported by the
New York Times on Wednesday.
Madoff was convicted in 2009 of defrauding thousands of
investors and is serving a 150-year prison sentence. JPMorgan
has been accused of ignoring warning signs that Madoff's
business was a fraud, often to win more fees and commissions.
Irving Picard, a trustee for Madoff's victims, accused
JPMorgan of ignoring warning signs about Madoff and sued the
bank for $19.9 billion. But a judge tossed all but $425 million
of Picard's lawsuit. An appeal of the ruling by Picard to the
U.S. Supreme Court is pending.
JPMorgan has said in the past there was no evidence showing
that anyone at the bank knew of Madoff's elaborate scheme. The
suspicious activity report the bank filed in London, two months
before Madoff was arrested, described his investment performance
as "too good to be true," according to Picard's lawsuit.
The settlement with federal prosecutors in Manhattan would
include more than $1 billion in penalties to resolve the
criminal case, which would specifically cite JPMorgan for
abetting Madoff's fraud.
Jennifer Queliz, a spokeswoman for U.S. Attorney Preet
Bharara, declined to comment.
The rest of the fines would be imposed by Washington
regulators, including the Office of the Comptroller of the
Currency and the Federal Reserve, for failures in JPMorgan's
anti-money laundering policy related to the Madoff case, one of
the sources said.
The sources said the settlement could come as early as this
month. The original goal, one of the sources said, was to
finalize it before the Christmas and New Year's holidays.
JPMorgan, the biggest U.S. bank by assets, recently reached
a $13 billion settlement in connection with a range of
government claims over bad mortgage securities and struck
another deal with regulators to pay about $1 billion for its
"London Whale" derivatives trading debacle.