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Jan
2014
3

Brand New Documents, Same Old Story: JPMorgan Obstructed Madoff Investigation

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Documents obtained by Newsweek via the website GovernmentAttic.org show that JPMorgan Chase has for years obstructed the federal government’s investigation into the ponzi scheme perpetrated by Bernie Madoff.  

Bankers getting off the hook? Romancing the system? You don’t say…

A deep look into the documents reveals that the Obama Administration has sided with big banks in the case, allowing the drivers of the 2008 economic collapse to run wild despite their wrongdoings.  In comparison to the savings and loan scandal, in which the FBI obtained nearly 3,000 felony convictions, only a handful of minor players have been charged in the Madoff scandal.  

Last March, Attorney General Eric Holder confirmed suspicions that the Obama Administration viewed the “too big to fail” financial institutions as “too big to prosecute.” Newsweek refreshes our memory:

“The size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy — perhaps even the world economy,” Holder testified.

The administration’s lax approach is clear from their behavior:

The Justice Department refused in September to back up Treasury inspector general staff who wanted a court order to enforce a subpoena, in effect shielding JP Morgan from law enforcement, the October 8 document shows.

The Justice Department told the Treasury Inspector General “that they were denying the request for enforcement of the subpoena,” which means officials “could not undertake further actions regarding this matter,” wrote Jason J. Metrick, the inspector general special-agent-in-charge.

When arrested in December of 2008, Bernie Madoff claimed to be the world’s largest money manager.  At the time he managed $64.8 billion of other people’s money.  That amount was nearly half of what JP Morgan Chase held in total and almost as much as Goldman Sachs and George Soros combined.  Now, five years after the fact, investigators continue to run into roadblocks as JP Morgan Chase protects its interests and proves itself above the scope of American law.  

It’s difficult to believe the Madoff scheme came as a surprise to JP Morgan, according to Newsweek:

At least one senior JPMorgan executive long suspected he was operating a criminal scheme. Over lunch in June 2007, this executive said “there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme,” according to an email sent from that lunch by the bank’s top risk manager and filed in a bankruptcy court case.

Despite this, JPMorgan continued doing business with Madoff almost until the moment of his arrest in December 2008. The Comptroller of the Currency bank examiners asked JPMorgan for its memos about Madoff soon after his arrest. They wanted memos from interviews with 90 bank employees who deal with Madoff.

The Justice Department’s failure to pursue the obstruction issue is particularly curious in light of the law governing attorney-client privilege in bank examinations. Federal law specifies that when a bank turns over confidential documents to bank examiners, those papers remain protected by attorney-client privilege for all other purposes.

Without intervention from the Obama Administration the Wall Street song will remain the same.  Even the shockingly low (but all-time high!) $13 billion mortgage settlement against JP Morgan chase was made tax deductible.  The message is clear to the victims of massive-scale bank malpractice: the government doesn’t have your back.

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