* JPMorgan agreed to pay $20 bln in 2013 to clear up legal
* U.S. prosecutor in Manhattan has brought 8 mortgage-fraud
By David Ingram and David Henry
WASHINGTON, Feb 4 JPMorgan Chase & Co
settled the latest in a string of legal claims on Tuesday when
it agreed to pay $614 million to the U.S. government and
admitted that it defrauded federal agencies by underwriting
sub-standard mortgage loans.
JPMorgan, the largest U.S. bank by assets, said as part of
the settlement that for more than a decade it approved thousands
of insured loans that were not eligible for insurance by the
Federal Housing Administration or the Department of Veterans
Affairs, according to court papers.
As a consequence, "both the FHA and the VA incurred
substantial losses when unqualified loans failed and caused the
FHA and VA to cover the associated losses," the U.S. Justice
Department said in a statement.
JPMorgan is one of several banks that has faced similar
allegations. Citigroup Inc and Deutsche Bank AG
have also reached settlements, while the Justice Department is
seeking $2.1 billion in penalties from Bank of America Corp
after a jury found the bank liable for fraud over
mortgages sold by its Countrywide unit.
Last year, JPMorgan agreed to about $20 billion in
settlements in its drive to clear up legal claims. The deals
covered claims over other mortgage issues, as well as
derivatives and power trading.
The latest settlement was filed in U.S. District Court for
the Southern District of New York and was approved by Judge J.
Paul Oetken, according to a statement from the U.S. Attorney's
Office in Manhattan.
The bank said in a statement that the "settlement represents
another significant step in the firm's efforts to put historical
mortgage-related issues behind it."
It added that it has already recorded reserves for the
settlement and does not expect the deal to have any significant
additional financial impact.
The settlement with the Justice Department began with a
whistleblower, Keith Edwards, who sued JPMorgan in January 2013
under an anti-fraud law known as the False Claims Act. The law
allows individuals to sue government contractors and suppliers
for defrauding taxpayers. Whisteblowers can keep a slice of the
penalty if successful.
It has not been determined what Edwards' share will be,
according to court papers. The existence of his suit was sealed
The office of Preet Bharara, the U.S. attorney in Manhattan
whose staff worked with Edwards on the suit, said the case was
one of eight civil fraud suits that it had brought since May
2011 alleging fraudulent lending practices by residential
In February 2012, Citigroup agreed to pay $158.3 million and
Flagstar Bancorp Inc agreed to pay $132.8 million. In
May 2012, Deutsche Bank settled for $202.3 million.
In other recent legal claims, JPMorgan on Monday agreed to
pay $1.45 million to settle four-year-old allegations brought by
the U.S. Equal Employment Opportunity Commission that the bank
had maintained a sexually hostile environment for women in a
mortgage loan center on Ohio.
On Tuesday a federal bankruptcy judge approved the bank's
$543 million deal to end two private lawsuits stemming from its
relationship with convicted Ponzi scheme mastermind Bernard
Madoff. Last month, the bank separately agreed
to pay more than $2 billion to settle criminal charges related
to the Madoff fraud.