Perhaps JPMorgan Chase had more to do with Bernie Madoff than Jamie Dimon would like to admit.
That is the contention of Irving Picard (right), the court-appointed trustee who is charged with recovering funds on behalf of Madoff’s victims. He sued JPMorgan Chase (jpm) in U.S. bankruptcy court Thursday, saying the bank enabled Madoff’s massive fraud.
Picard wants almost $1 billion in fees and profits the bank pocketed over two decades as the banker for Bernard L. Madoff Investment Securities, plus $5.4 billion for its alleged role in aiding and abetting the fraud.
He said the bank saw clear signs Madoff was ripping off his clients but did nothing.
“JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” said David J. Sheehan, counsel for the Trustee and a partner at Baker & Hostetler LLP, the court-appointed counsel for the Trustee. “While many financial institutions enabled Madoff’s fraud, JPMC was at the very center of that fraud, and thoroughly complicit in it.”
The suit against JPMorgan Chase comes in spite of CEO Jamie Dimon’s claim at the bank’s 2009 annual meeting that “we had almost nothing to do with” Madoff.
JPMorgan is sticking with that line. It blasted Picard Thursday, calling his claims “disappointing” and “demonstrably false.”
JPMorgan isn’t the only bank in Picard’s cross hairs. Last week he sued Switzerland’s UBS (UBS) for $2 billion, claiming it furthered Madoff’s ripoff scheme by lending “an aura of legitimacy” to the flow of money going into the scheme via so-called feeder funds.
Madoff, 72, pleaded guilty in March 2009 to ripping off his clients and was sentenced to 150 years. Estimates of client losses initially ranged as high as $65 billion but have since come down to around a third of that.
The Picard suit isn’t the first one JPMorgan has faced in the Madoff mess. A federal judge in New York this summer dismissed a suit by an investment partnership that lost $13 million when Madoff’s scheme collapsed.
The partnership, known as MLSMK Investments, claimed JPMorgan Chase looked into Madoff’s operations and concluded he was defrauding investors before the bank pulled $250 million of its own money from Madoff’s funds.
Chase’s decision to pull the funds before Madoff’s collapse was reported in a January 2009 New York Times story. But the judge ruled the investors in the lawsuit didn’t show Chase had actually investigated Madoff before making the withdrawal.
Picard contends in his press release Thursday that a request by JPMorgan compelled the bankruptcy court to seal the complaint, but he says he will work to have it unsealed.
“JPMC has designated virtually all of their information as confidential,” he said. “While JPMC may want to hide the full extent of its significant role in the Madoff fraud from the public, we intend to move to have the complaint made public as soon as possible.”