By LARRY NEUMEISTER and TOM HAYS
JPMorgan Chase & Co., already beset by other costly legal woes, has agreed to pay $1.7 billion to settle criminal charges that the bank ignored obvious warning signs of Bernard Madoff’s massive Ponzi scheme, federal authorities said Tuesday.
The $1.7 billion represents the largest ever forfeiture by a U.S. bank and the largest Department of Justice penalty for a Bank Secrecy Act violation, the government said. The settlement includes a so-called deferred prosecution agreement that requires the bank to acknowledge failures in its protections against money laundering but also allows it to avoid criminal charges. No individual executives were accused of wrongdoing.
The deal was announced by the office of U.S. Attorney Preet Bharara, who scheduled an afternoon news conference to detail the agreement to resolve criminal charges: two felony violations of the Bank Secrecy Act in connection with the bank’s relationship with Bernard L. Madoff Investment Securities, the private investment arm of Madoff’s former business.
Under the agreement, the criminal charges will be deferred for two years as JPMorgan admits to its conduct, pays the $1.7 billion to victims of Madoff’s fraud and reforms its anti-money laundering policies, prosecutors said in a release.
A statement of facts included in the agreement describes internal communications at JPMorgan expressing concerns about how Madoff was generating his purported returns. It says executives were disturbed by the fact that Madoff wouldn’t let the bank examine his books.
“How much do we have in Madoff at the moment?” a bank analyst wrote in a 2008 email. “To be honest, the more I think about it, the more concerned I am.”
JPMorgan didn’t immediately comment on the settlement. It shares fell 55 cents to $58.45 in morning trading Tuesday.
The deal was similar to one reached in late 2012 with the British bank HSBC, which agreed to pay $1.9 billion to settle claims it laundered money for Iran, Libya and Mexico’s murderous drug cartels.