Friday, May 22, 2015

Felony Plea and Dividend Increase: Business as Usual for JP Morgan

A Felony Plea and Dividend Increase:  Business as Usual for JP Morgan

Yesterday was a busy one for JP Morgan.  It pleaded guilty to a felony charge for currency manipulation and agreed to pay an $892 million fine.[1]  At the same time, the SEC waived a series of provisions in the securities laws, so that the bank can continue to do business even though it is a felon.  And, it agreed to increase its dividend by 10% to 44¢/shares, a nine-fold increase since 2009. 

As this week draws to a close, I leave you with a list of settlements by JP Morgan since 2011, which total over $38 billion.  To be fair some of settlements involved practices by companies, such as Bear Stearns, acquired by JP Morgan.  However, the list doesn’t include any settlements or fines under $100 million of which there were many.

I’ve also included a summary of the Board of Director’s assessment of Chairman Jamie Dimon’s performance in 2014, which was used to justify his $20 million compensation package.

It’s clear that Mr. Dimon should have been dismissed some time ago.  If you’d run a business unit with this many violations, you probably would have trouble getting another job in your industry, let alone retaining your current position.  That’s not how it works in finance.   As you’ll see, Mr. Dimon is lauded for his performance and “operating with fortress principles”.   Those pesky fines and violations aren’t worth mentioning.

Violation/Settlement                                                   Amount           Date
Misleading Collateralized Debt Investors                  $154 MM       6/21/11
Anticompetitive Muni Bond Bidding                         $228MM        7/7/11
Foreclosure Abuse                                                      $5.29 B           2/9/12
Misrepresentation of Mortgage Delinquencies          $270 MM       11/16/12
Additional Foreclosure Abuses                                  $1.8 B             1/1/13
Manipulating Energy Markets                                   $410MM         7/3/13
Illegal Credit Card Practices                                       $389MM        9/9/13
Fraud on Derivatives Trade (Whale Trade)                $920MM        9/19/13
Fannie Mae/Freddie Mac Fines                                  $5.1B              10/25/13
Mispriced Inst’l mortgage Securities                          $4.5B              11/15/13
Misleading Representations on Toxic Mortgages      $13.0B              11/19/13
LIBOR Rigging                                                          $108MM         12/4/13
Madoff- Violations Anti-money laundering               $2.6B              1/6/14
False Claims FHA and Veteran’s Mortgages             $614MM        2/4/14
Forced Placed Homeowners’ Insurance                     $300MM        4/3/14
Currency Manipulation                                              $1.3B              11/21/14
Alt-A Mortgage Settlement                                       $500MM        2/3/15
Currency Manipulation                                              $892MM        5/20/15

2015 Proxy Statement Justifying Mr. Dimon’s Compensation:

In addressing Mr. Dimon’s performance, the CMDC and Board focused on the Firm’s strong results in 2014, continuing its track record of successfully adapting to an evolving and challenging landscape. The 2014 priorities the Board set out for Mr. Dimon centered on building exceptional client franchises, operating with fortress principles and maximizing long-term shareholder value (emphasis added).              

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