Five years ago today, the largest Ponzi scheme in history was revealed. As the New York Times recently reported, Bernie Madoff’s massive, decades-long fraudulent scheme was “breathtaking” in scope: “$64.8 billion in paper wealth and at least $17.5 billion in cash losses.” In fact, the Madoff losses were so “staggering,” the second, third and fourth largest Ponzi scheme losses collectively only amounted to 60% of what Madoff stole.
Of course, numbers only tell part of the story, often obscuring the personal financial wreckage Madoff’s scheme inflicted on investors across the country was equally mind-boggling.
JP Morgan Chase was Madoff’s banker for decades. The trustee appointed by the court to recover funds for injured investors filed a complaint against the bank (copy attached below), which details allegations of the bank’s role in and knowledge of Madoff’s scheme. The complaint states that JP Morgan Chase “was at the very center of the fraud, and thoroughly complicit in it.” Indeed, the trustee said that the bank “turned a blind eye to” Madoff’s fraud, while stuffing its pockets with almost $500 million from “servicing” Madoff’s accounts and saving itself another $250 million invested with Madoff by withdrawals right before the scheme was revealed. It is a shocking story and the attached complaint should be read by anyone interested in this matter.
Federal prosecutors are also investigating JP Morgan Chase’s Madoff business to determine if crimes have been committed. Consistent with recent practice, JP Morgan Chase is trying desperately to settle all matters related to its role in the Madoff Ponzi scheme without any public disclosure of or accountability for its alleged illegal and criminal conduct. Media reports suggest that those negotiations are pretty far along.
As with the recent $13 billion civil settlement with the Department of Justice, JP Morgan Chase should not be allowed to basically pay hush money to the government so that they won’t detail for the American public the bank’s illegal, if not criminal, conduct. Merely announcing a big settlement with terms that appear tough is simply a gross disservice to the American people, who should be given ample, detailed information to determine for themselves if the settlement is appropriate to the crimes.
JP Morgan Chase’s interests are clear: cut the best deal possible while keeping as much as possible hidden from the American public. Federal prosecutors should not allow that to happen, regardless of the amount of money paid or the other terms JP Morgan is willing to agree to. If the Department of Justice is to live up to its name, it must get the best deal that includes maximum public disclosure and certainly no less than fully informing the public of JP Morgan Chase’s role in connection with Madoff’s historic crimes.
This isn’t just about money, reimbursing victims or even punishing JP Morgan Chase. This is about truth, transparency and accountability, not just for JP Morgan Chase, but also for the Department of Justice which itself is working overtime to repair its well-deserved tattered reputation. Any deal that does not include full and complete public disclosure sufficient to enable truly independent third parties to evaluate the settlement should be viewed as a sweetheart deal that simply could not withstand scrutiny.