By Sarah N. Lynch and Aruna Viswanatha
WASHINGTON Feb 10 The non-profit group Better
Markets filed a lawsuit against the U.S. Justice Department on
Monday to block what it called an "unlawful" $13 billion
settlement with JPMorgan Chase & Co over bad mortgage
loans sold to investors before the financial crisis.
The record settlement, which was reached in November, does
not release JPMorgan 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,
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," he said.
Better Markets was founded in 2010 to advocate for tough
Wall Street reforms.
The lawsuit, which names the Justice Department and Attorney
General Eric Holder, was filed in federal court in Washington,
Better Markets is seeking to have the court prevent the
Justice Department from enforcing the settlement until a judge
Justice Department spokeswoman Ellen Canale said the agency
was confident the settlement complied with the law. JPMorgan
spokeswoman Jennifer Zuccarelli declined to comment on the
Lawmakers and others have criticized the administration of
U.S. President Barack Obama for failing to hold Wall Street
banks, executives, and other parties accountable for the
excesses that resulted in the housing crisis.
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 Justice Department claims.
It also included a $4 billion consumer relief package, and a
separately negotiated $4 billion settlement with the regulator
of mortgage financiers Fannie Mae and Freddie Mac.
Another $1.4 billion of the $13 billion package resolved a
lawsuit from the National Credit Union Administration.
The settlement was released to the public, but not filed in
While the Justice Department enters into non-prosecution
agreements on the criminal side without filing them in court, it
rarely enters into similar out-of-court settlements over civil
violations. The agency also did not release a complaint that it
had prepared to file against JPMorgan before it negotiated the
In its complaint, Better Markets claimed the settlement with
the bank lacked critical facts that could help justify the deal,
such as failing to name any individuals responsible for the
wrongdoing, how much damage investors had suffered or even
"which specific laws were violated."
"No one has any ability to determine if the $13 billion
agreement is fair, adequate, reasonable, and in the public
interest or if this is a sweetheart deal entered into behind
closed doors," the complaint said.
Kelleher, a former attorney at Skadden, Arps, Slate, Meagher
& Flom, has become well-known for his critique of both Wall
Street banks and regulators who he has often accused of failing
to hold the banks accountable for wrongdoing.
Kelleher announced the lawsuit during a press conference at
the National Press Club on Monday, armed with large posters
including one with photos of Holder and JPMorgan Chief Executive
Officer Jamie Dimon.