In the past few months, the nation’s biggest bank has found itself ensnared in a series of probes and litigation that may trump the legal woes of other mega-banks. JPMorgan is staring down six separate investigations by the Justice Department, four by the Securities and Exchange Commission and three by the Commodity Futures Trading Commission, according to the bank’s second-quarter filing.
There are also probes being conducted by the Federal Reserve, the Office of the Comptroller of the Currency, Congress and British authorities. And that is only the investigations. The bank is also facing a mountain of individual and class-action lawsuits.
As a result of these cases, JPMorgan said it anticipates $6.8 billion in future legal costs in excess of the money it has already set aside to handle litigation. That is larger than the amount that other banks have added to their reserves, according to analysis from Barclays Research.
At this rate, JPMorgan is on track to unseat Bank of America as the bank with the greatest legal troubles. Bank of America has held that title for nearly three years because of litigation tied to its 2008 acquisition of beleaguered mortgage lender Countrywide Financial. The bank is still battling cases, but the number has waned.
Almost every corner of JPMorgan’s business is under scrutiny from state, federal and international authorities. Regulators are investigating the way the bank recouped credit card debts from delinquent borrowers, how it marketed mortgage-backed securities and whether it turned a blind eye to Bernie Madoff’s Ponzi scheme.
The Wall Street Journal reported Monday that the Justice Department is also looking into whether the bank manipulated energy markets, an allegation that led to a $410 million settlement with the Federal Energy Regulatory Commission last month. Meanwhile, the SEC is investigating whether JPMorgan hired the children of Chinese officials to boost its business in China, according to a person familiar with the case who spoke on the condition of anonymity.
The bank’s biggest legal headaches are tied to its handling of the $6.2 billion trading losses that originated in its London office. Congress, the Fed, the SEC, the Office of the Comptroller of the Currency, the Commodity Futures Trading Commission, the Justice Department and British authorities are all investigating the bank’s chief investment office because of the trading blunder, according to a public filing.
JPMorgan declined to discuss any of the ongoing investigations, as did the federal prosecutors and regulators running the probes.
In an annual letter to shareholders, JPMorgan chief executive Jamie Dimon said the bank is “dramatically strengthening how we carry out our compliance mission, including significantly increasing our compliance staff.”