Posted Feb 04, 2011 01:18 am CST
Unsealed today in federal bankruptcy court, a $6.4 billion lawsuit filed late last year against JPMorgan Chase & Co. details the theories under which a trustee liquidating the business of convicted Ponzi schemer Bernard Madoff is seeking to force the bank to ante up for some Madoff investor losses.
Copies of the redacted complaint provided by the New York Times (reg. req.) and the Wall Street Journal (sub. req.) contend that Chase allowed Madoff to conduct banking business right up to the day of his December 2008 arrest, although the bank allegedly should have known the transactions didn’t square with Madoff’s supposed investment activities and alerted regulators earlier.
“As we allege in the complaint, JPMC had a palpable concern that Madoff was a fraud for years, but it was not until October 2008 that it reported Madoff to government officials,” says attorney Deborah Renner of Baker & Hostetler, who is working with trustee Irving Picard. The bank, which meanwhile allegedly withdrew most, but not all, of the money it had invested in Madoff feeder funds, “appears,” she says, “to have been concerned only with protecting its own investments,” reports the New York Daily News.
In a detailed written statement responding to the suit that is published in a New York Times (reg. req.) article today, the bank says it did nothing wrong, and promises a vigorous defense against the “unfounded claims” in the lawsuit.
Madoff was not a significant commercial banking customer for JPMorgan Chase and the bank earned no extraordinary sums from standard fees it charged for his accounts, the statement says.
“At all times, JPMorgan complied fully with all laws and regulations governing bank accounts, including the regulations invoked by the trustee,” it concludes. “In arguing otherwise, the trustee has misstated both the facts that JPMorgan has presented to him and the requirements imposed by federal law.”
The Wall Street Journal (sub. req.) also has a lengthy article about the unsealed suit.
Additional and related coverage:
ABAJournal.com: “Madoff Trustee Sues JPMorgan Chase, Seeks $6B for Alleged Blind Eye to Massive Swindle”
ABAJournal.com: “Madoff Trustee Sues Third Major Bank, Seeks $9B”
ABAJournal.com: “Madoff Trustee Sues ‘Criminal Soul Mate’ Banker, Seeks $59B (Yes, Billion) in RICO Suit”
Floyd Norris (New York Times): “What Did Chase Know, and When Did It Know It?”