JPMorgan Chase & Co.’s claim that it found possible employee intent to misprice trades in a unit that lost $5.8 billion may put distance between management and any wrongdoers while providing a road map for U.S. investigators.
“E-mails, voice tapes and other documents, supplemented by interviews” were “suggestive of trader intent not to mark positions where they believed they could execute,” the bank said in a presentation July 13 as it reported net income fell 9 percent to $4.96 billion. “Traders may have been seeking to avoid showing full amount of losses,” the bank said, noting management had concerns about the integrity of the prices used. The bank didn’t provide evidence to support the allegations.
Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment on whether the bank was suggesting traders had broken the law. JPMorgan didn’t name any employees involved in the potential mismarking of positions.
The e-mails and voice recordings that JPMorgan claims to have would be particularly important to proving securities fraud, said Peter Henning, a professor at Wayne State University Law School in Detroit and a former enforcement attorney for the SEC between 1987 and 1991.
Ina Drew, the former head of the unit, will forfeit her pay and other managers were ousted following the bank’s internal inquiry. The bank accepted Drew’s offer to return about two years of compensation, the maximum clawback allowable under employment terms, said Joe Evangelisti, a company spokesman. Drew didn’t respond to a request for comment.