JP Morgan Seems To 'Love That Dirty Money'

If those in my beloved hometown of Boston “love that dirty water”, then similarly current management at my last stop on the sell side of Wall Street, that being JP Morgan, seem to ‘love that dirty money.‘

The filth and stench surrounding this story runs so high as to have recently influenced JPM's bedmates — er, I mean regulators, — to pronounce that they do not trust JP Morgan management. Wow. That's saying something.

We know that only 1 in 5 in America trust our banks,(down from 1 in 2 a mere 5 plus years ago), but for regulators to now voice their distrust in JPM's management is a cry from the bedroom not often heard. What's going on at JPM? Let's navigate.   

We now learn about another JP Morgan whistleblower who has paid the ultimate price, JPM's questionable dealings in the electricity market, money laundering, and so much more as The Center for Public Integrity exposes the bank's devotion to fighting the flow of dirty money. Bring the waders and let's move downstream.

First stop, let's meet Jennifer Sharkey:

In the summer of 2009, Jennifer Sharkey was moving in select company. As a Manhattan-based vice president at JPMorgan Chase & Co.'s Private Wealth Management group, she juggled relationships with 75 “high net worth” clients with assets totaling more than half a billion dollars.

Things changed for her, she claims, after she raised doubts about a “suspect” foreign client who had millions stashed in various accounts at the bank.

The client was making questionable cash transfers and concealing who actually owned certain accounts, according to a lawsuit Sharkey is pursuing in federal court in Manhattan. She also found evidence, her suit claims, that the client had falsified financial statements for one of his companies and that he'd been involved in the “unexplained disappearance” of millions of dollars in merchandise in another venture.

After she warned high-level bank officials that the client might be involved in fraud and money laundering, her suit claims, JPMorgan moved to silence her — pressuring her to stop raising questions about the client, assigning her other clients to junior colleagues and, finally, firing her.

Seemingly standard treatment for a whistleblower. Continuing right along,

In 2011, the bank paid nearly $90 million to settle regulators' claims that it had violated economic sanctions against Iran, Cuba and other countries under U.S. embargoes.

In January, a consent order from JPMorgan's main federal regulator, the Office of the Comptroller of the Currency, cited the bank for “critical deficiencies” in its anti-money-laundering controls, including inadequate  procedures for monitoring transactions at foreign branches.

JPMorgan and other major banks have increased their risks and rewards in the offshore world by weaving a web of branches and subsidiaries across places that have been tagged as havens for financial secrecy and criminal activity.

Secret records obtained by ICIJ reveal how many of the world's top banks – including UBS and Clariden in Switzerland, INGand ABN Amro in the Netherlands and Deutsche Bank in Germany – have worked to set up their customers with secrecy-cloaked companies in the British Virgin Islands, the Cook Islands and other offshore locales.

The banks deny wrongdoing.

A 2008 U.S. government report found JPMorgan had 50 subsidiaries in Bermuda, the Bahamas and other places labeled as tax havens or secrecy jurisdictions, tied for 11th highest among the 100 largest U.S. companies.

Since then the bank has expanded its reach in some offshore centers. Its tally of subsidiaries in the Cayman Islands grew from seven in 2007 to 20 at the end of 2012, securities filings show. Over that span its subsidiaries in Mauritius — a tiny isle off Africa's eastern coast that's been called “a Cayman Islands to India” — grew from eight to 14.

When the topics surrounding Madoff, Enron, and manipulation of electricity markets, once again JP Morgan is prominently displayed.

The bank held as much as $5.5 billion in Madoff-connected cash and, according to court filings by Picard, earned an estimated half-billion dollars from fees and other revenues generated by Madoff's billions.

Any concerns within the bank about Madoff “were suppressed as the drive for fees and profits became a substitute for common sense, ethics and legal obligations,” Picard's lawsuit said.

As Enron's primary banker, did JP Morgan learn a thing or two about manipulating electricity markets? Then how to explain that,

Investigators from the agency that regulates power markets have found a unit of JPMorgan Chase & Co manipulated trading in the California and Michigan electricity markets, the New York Times reported, in what would be the latest government crackdown on trading abuses in the markets.

The newspaper said it reviewed a confidential, 70-page government document that was sent to JPMorgan in March and that also criticized Blythe Masters, the bank's current head of global commodities and former chief financial officer.

How does all this come to pass? Actually very easily. When bankers own the politicians and regulators they will push the envelope as far as they possibly can. When revenue streams in other books of business decline, then the questionable activities within the dirty money are accentuated. As was then, is now, and forever shall be UNLESS and UNTIL the pols and the regulators are forced out of the bankers' bedroom.

I can only chuckle thinking that JP Morgan's chairman and CEO Jamie Dimon is stealing a page from Washington's handbook and will try to shovel away a lot of this dirt by soon hosting a town meeting with the junior staff of the OCC.

If they took out the banking systems and put in sewing machines, the Department of Health would likely shut the place down.

Navigate accordingly.

Larry Doyle

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.