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Female Lawyer At JPMorgan Chase Blows Whistle On Fraud

JPMorgan Chase & Co
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EDITOR'S NOTE: When JPMorgan Chase lawyer Alayne Fleischmann came forward in 2006 alleging “massive criminal securities fraud” at the bank, the end result was the U.S. Department of Justice forcing Chase to pay $13 billion to settle the charges. Last week, in a move that seemed eerily familiar, lawyer “Shaquala Williams, who had worked in compliance at JPMorgan Chase, came forward. Williams has filed a lawsuit in the U.S. District Court for the Southern District of New York with allegations that are so alarming that they should send the Justice Department, the bank’s outside auditing firm, and the Audit Committee of the Board of Directors into a frenzy.” Williams’ charges include “numerous, stunning allegations that the bank was falsely reporting to the Justice Department that it was in compliance with the non-prosecution agreement it had reached in 2016 when, in fact, it was simply reporting what the Justice Department wanted to hear while gaming the terms of the agreement.” Fifteen years ago, Fleischmann was the hero we needed to shed light on JPMorgan Chase’s misdoings, and now, a decade and a half later, after the bank tried to skirt the penalties from the last case, Williams has become the new hero.

The previous time a female lawyer who worked at JPMorgan Chase blew the whistle on frauds occurring inside the bank, the U.S. Department of Justice, along with other federal and state regulators, ended up charging the bank with selling toxic mortgage securities to investors and making JPMorgan Chase pay $13 billion to settle the charges.

That female lawyer was Alayne Fleischmann, as Matt Taibbi detailed in a report for Rolling Stone in 2014. Taibbi summarizes the matter as follows:

“Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as ‘massive criminal securities fraud’ in the bank’s mortgage operations.”

According to Fleischmann, who worked as a Transaction Manager at JPMorgan, her department was assigned with assuring that only good mortgage loans were securitized but, instead, under pressure from bosses, it waived in improperly underwritten mortgages that were likely to default. After failing to stop the fraudulent process with verbal warnings, Fleishmann memorialized the details in a long letter to a superior. She found herself dismissed in a round of layoffs.

On Thursday, a female attorney, Shaquala Williams, who had worked in compliance at JPMorgan Chase, came forward. Williams has filed a lawsuit in the U.S. District Court for the Southern District of New York with allegations that are so alarming that they should send the Justice Department, the bank’s outside auditing firm and the Audit Committee of the Board of Directors into a frenzy. (See the full text of William’s federal complaint here.)

According to the lawsuit, Williams has “approximately 12 years of experience in financial crimes compliance primarily for financial institutions.” She joined JPMorgan Chase in June 2018 and was working in its Global Anti-Corruption Compliance group. After reporting serious misconduct by the bank, she alleges that the bank retaliated against her by firing her in October 2019.

Williams makes numerous, stunning allegations that the bank was falsely reporting to the Justice Department that it was in compliance with the non-prosecution agreement it had reached in 2016 when, in fact, it was simply reporting what the Justice Department wanted to hear while gaming the terms of the agreement.

The Justice Department had charged in 2016 that JPMorgan’s Asia subsidiary had through “certain senior executives and employees of the Company conspired to engage in quid pro quo agreements with Chinese officials to obtain investment-banking business, planned and executed a program to provide specific personal benefits to senior Chinese officials in the position to award or influence the award of banking mandates, and repeatedly falsified or caused to be falsified internal compliance documents in place to prevent the specific conduct at issue….”

To put it bluntly, the bank was putting on its payroll the children of high Chinese government officials in order to further its business interests in China.

In exchange for avoiding prosecution, the Justice Department required the bank to put in place compliance controls around third-party payments. Williams alleges the following was happening inside the bank to subvert those controls:

“If properly implemented, invoice controls would ensure that JPMorgan was not funding corruption by labeling corrupt third-party payments as legitimate business expenses.

“Williams also raised concerns because the Bank had no requirements for the Compliance group to review invoices for red flags, high risk indicators, or other anomalies that indicate corrupt payments; because the Bank granted many third-party intermediaries exemptions from invoice requirements without documenting or explaining the basis for doing so; because the Bank had no controls to ensure that the entity requesting payment was the same third-party intermediary that had contracted with the Bank; because the Bank had no controls to ensure that the third party intermediary had a contract or other agreement with the Bank before performing the services; and because the Bank could not reconcile actual payments with the invoices…

“Williams also raised concerns about JP Morgan’s inaccurate books and records. There were inconsistencies between the TPI payment records and the Bank’s centralized payment systems that feed into its general ledger. For example, a former government official (‘TPI1’) was a high risk JPMorgan third-party intermediary for Jamie Dimon (‘Dimon’), JPMorgan’s Chief Executive Officer. The Bank processed the invoices for TPI1 through the ‘emergency payment method.’ The Bank’s policies made clear that the ‘emergency payment method’ should be used for urgent payments critical to the day-to-day operations of Chase such as emergency utility bills ‘to prevent the lights from going out.’ The TPI1 invoices did not satisfy this standard, thus leaving the payment method open to unchecked corrupt payments and violations of the Bank’s accounting controls, the NPA, SEC Order, SEC rules and regulations, and provisions of Federal law relating to fraud against shareholders. Further, the payments as reflected in the general ledger did not correspond with management’s general or specific authorization for the invoice payments, thereby creating inaccurate records that also constituted violations of the NPA, the SEC Order, SEC rules and regulations and/or provisions of Federal law relating to fraud against shareholders.”

The lawsuit contains this additional stunning allegation related to these invoices: “Williams raised concerns that GACC [her department] was maintaining an alternate ledger of corrected transactions that did not match the uncorrected transactions on the official JPMorgan balance sheet.” That sounds a lot like two sets of books. If the U.S. Department of Justice isn’t concerned about that at the nation’s largest bank, we have big problems not just in the U.S. banking system but at the U.S. Department of Justice as well.

If these allegations sound implausible for a bank that is constantly fawned over by mainstream media, consider this: JPMorgan Chase was previously charged in 2014 with two criminal felony counts for facilitating the crime of the century – Bernie Madoff’s multi-decade Ponzi scheme, the largest in history. The bank maintained the business bank account for Madoff and looked the other way at giant red flags that screamed money laundering. The bank told U.K. regulators that it thought Madoff was running a Ponzi scheme while keeping mum to U.S. regulators. (See JPMorgan and Madoff Were Facilitating Nesting Dolls-Style Frauds Within Frauds.)

Those were the first two felony charges brought by the Justice Department against the bank. Since then, the bank has accumulated three more felony charges for rigging markets: the foreign exchange market, precious metals and U.S. Treasury market. It admitted to all five counts. And in addition to its felony charges, the bank has committed a staggering list of other frauds while being allowed to simply pay tens of billions of dollars in fines and walk away. See JPMorgan Chase’s rap sheet here.

Fleischmann and Williams are not the only lawyers to have called attention to fraud inside JPMorgan Chase. In 2016, trial lawyers Helen Davis Chaitman and Lance Gotthoffer released the book JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook. In Chapter Five of the book, Chaitman and Gotthoffer provide this analysis: (JPMC stands for JPMorgan Chase.)

“In Chapter 4, we compared JPMC to the Gambino crime family to demonstrate the many areas in which these two organizations had the same goals and strategies. In fact, the most significant difference between JPMC and the Gambino Crime Family is the way the government treats them. While Congress made it a national priority to eradicate organized crime, there is an appalling lack of appetite in Washington to decriminalize Wall Street. Congress and the executive branch of the government seem determined to protect Wall Street criminals, which simply assures their proliferation.”

Chaitman and Gotthoffer then suggested a path forward:

“If Jamie Dimon is running a criminal institution, he should be prosecuted for it. And law enforcement has the perfect tool for such a prosecution: the Racketeer Influenced and Corrupt Organizations ACT (RICO).

“Congress enacted RICO in 1970 in order to give law enforcement the statutory tools it needed to prosecute the people who committed crimes upon orders from mob leaders and the mob leaders themselves. RICO targets organizations called ‘racketeering enterprises’ that engage in a ‘pattern’ of criminal activity, as well as the individuals who derive profits from such enterprises. For example, under RICO, a mob leader who passed down an order for an underling to commit a serious crime could be held liable for being part of a racketeering enterprise. He would be subject to imprisonment for up to twenty years per racketeering count and to disgorgement of the profits he realized from the enterprise and any interest he acquired in any business gained through a pattern of ‘racketeering activity.’ ”

But despite this unprecedented and recurring pattern of crime at JPMorgan Chase, all occurring while Jamie Dimon was Chairman and CEO at the bank, neither the federal prosecutors nor his own Board of Directors have demanded his removal.

Originally posted on Wall Street On Parade.

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