JP Morgan (JPM) To Settle Madoff Claim: Wall Street ‘Code of Silence’

News breaks this morning that JP Morgan (JPM), Bernie Madoff’s lead banker, is close to settling with the Feds under a seldom used deferred prosecution agreement.

What is that?

Think of it as the equivalent of “you guys and gals had better behave yourselves going forward or we’re going to need to revisit this.” Truth be told, a deferred prosecution agreement is tougher than the standard “neither admit nor deny” treatments accorded Wall Street banks. How so? Here’s how.

It “lists the bank’s criminal violations in a court filing but stops short of an indictment as long as JP Morgan pays the penalties and acknowledges the facts of the government’s case.” Let’s revisit the Madoff trustee’s lawsuit brought against Morgan from early 2011. >>>>>>>>>>>>>>>>

We learn from that lawsuit that there were 21 causes of action against JPM individually designated as: preferential transfers; fraudulent transfers (numerous counts); aiding and abetting a fraud; aiding and abetting a breach of fiduciary duty; conversion; unjust enrichment; fraud on the regulator.

In reading through this document, it would appear to be a “How To Manual” for the opening and ongoing management of a laundromat.

Yet given what appears to be a preponderance of material supporting criminal charges, the question remains, why didn’t anybody from within JP Morgan blow the whistle long, loud, and unceasingly in order to expose the Madoff scam.

Truth be told, we do not know that that did not happen. How is that? Regrettably the Wall Street ‘code of silence’ in situations such as these is overpowering in putting the muzzle on those who might try to do the right thing. In point of fact, chapter 9 in my soon to be released book is entitled Code of Silence and details specific cases of individuals who did try to do the right thing and what happened to them. It’s not pretty.

Neither is the mess that the DOJ and the Madoff trustee are still trying to clean up from the Madoff scam.

We need a lot more than deferred prosecution agreements to make sure that scandalous situations such as Madoff never happen again. How might the cultural change on Wall Street that breaks this code of silence begin to gain a foothold?

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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