JP
Morgan Chase just agreed to pay another $1.7 billion to the government as
part of a criminal settlement agreement.
So what was Chase’s alleged crime this time around? The government alleges Chase violated the
Bank Secrecy Act by failing to file a “suspicious activity report” for certain “suspicious
transactions” in Bernie Madoff’s bank account. (Source: WSJ.) I find this absolutely hilarious, given that
the Securities and Exchange Commission (SEC) did absolutely nothing to stop
Madoff, even though a Wall Street Analyst named Harry Markopolos did all of the
SEC’s work for it, mathematically proved that Madoff was running a ponzi scheme,
notified the SEC repeatedly in writing, and begged the SEC to put a stop
Madoff’s then ongoing crimes.
In
response to Markopolos’s work, the SEC did nothing—either because it chose not
to, or, as Markopolos has asserted, because it didn’t understand basic
financial mathematics that are taught at the undergraduate level. But now, despite the government’s refusal (or
inability) to acknowledge (or detect) Madoff’s fraud even after Markopolos spelled
it out and literally hand-delivered the evidence, the government is punishing
Chase for not reporting “suspicious activity.”
That, quite simply, is a joke.
I
realize that Chase brought much of its legal woes on itself, and that a big
part of its problem is growth: the conglomerate is just way too big to be
managed effectively—or at all. I also
realize that this is a business decision.
Chase’s stock price keeps rising, and the shareholders sit back and raise
a glass every time Chase resolves another one of its legal issues for a mere
billion or two. Quite frankly, this latest
settlement barely affects the bottom line.
But, these government payoffs have to stop sometime, don’t they?
Instead
of paying the $1.7 billion-plus in a settlement, how about paying me $1.7 million—a
mere fraction—to defend Chase against this nonsense? My opening statement would
be the shortest (and possibly the most effective) in the history of so-called
complex litigation:
Ladies
and gentlemen of the jury, the government is going to bore the hell out of you
for the next three to four months with lifeless witness after lifeless witness,
meaningless document after meaningless document, and so-called expert after
so-called expert. In fact, you might see me nodding off from time to time during the next few months.
Now,
I could take up another three or four months of your life with my own reports
and statistics, but those would just be more meaningless words and
numbers. The bottom line is this: a guy
named Harry analyzed Madoff’s operation
from top to bottom. Harry spelled out in
incredible detail how Madoff was breaking the law. Harry then repeatedly sent this information to
the government—not to Chase Bank, but to the government. And year after year after year, the
government said that everything with Madoff was on the up-and-up. All the government had to do was read Harry’s report to
see that something was wrong, but it didn’t.
Had the government done its job, Bernie Madoff’s operation would have
been shut down years before he confessed.
Now,
to cover up its own incompetence, the government is coming after Chase. Chase didn’t have the benefit of seeing Harry’s
detailed reports outlining Madoff’s fraud.
Chase only maintained a bank account for Madoff.
So,
you can blame Madoff. You can blame the
more financially literate of Madoff’s investors—that group of people knew that
you can’t get ten percent returns year after year after year without something
illegal going on. You can blame the
government for not listening to Harry.
But you can’t blame Chase. The
blame-game has to end. The government
needs to take responsibility for failing the unsophisticated Madoff
investors. And even if it won’t do that,
you cannot convict Chase for the government’s incompetence.
Four
months later: “not guilty.”
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