Saturday, July 09, 2011

The JP Morgan shell game

J.P. Morgan continues to shell out money to keep from going to jail, or at least to avoid the prospect.

J.P. Morgan charged with rigging municipal bond deals
J.P. Morgan Securities rigged bids in at least 93 municipal bond deals in 31 states for eight years beginning in 1997, the Securities and Exchange Commission charged Thursday.

The government said the firm agreed to pay $228.2 million to settle charges

recent enforcement actions have portrayed this seemingly staid corner of the banking world as having been a feasting ground for corrupt financiers.

Thursday’s settlement was another mark against J.P. Morgan Chase, parent of the securities firm.

Last month, J.P. Morgan Securities agreed to pay $153.6 million for allegedly selling investors a complex investment that was secretly designed to help a hedge fund profit at their expense.

In 2006, the SEC charged J.P. Morgan Securities with abuses in the market for another type of investment known as auction-rate securities. In that case, the firm agreed to pay a $1.5 million fine.

J.P. Morgan Securities won the bidding in some transactions because it obtained information from the agents about competing bids, the SEC charged. In other instances, the bidding was rigged in J.P. Morgan’s favor, and in still other deals, J.P. Morgan helped other parties win by deliberately submitting losing bids, the agency said.

“Municipal issuers and investors didn’t stand a chance against the fraudulent strategies [J.P. Morgan Securities] and others used to guarantee profits,” Robert Khuzami, the SEC’s enforcement director, said in a statement.

The firm neither admitted nor denied wrongdoing in its settlement with the SEC. But in its settlement with the Justice Department, it admitted to illegal anti-competitive conduct by former employees. Under its agreement with Justice, the firm avoided prosecution.

“The investigations focused on a small desk that was discontinued and on certain employees who are no longer with the firm,” J.P. Morgan Chase said in a statement. “These employees concealed their conduct from management.”

Management doesn't commit illegal action. Small desks do. But there's no constitutional right to pack a small desk.

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