Friday, September 20, 2013

JP Morgan (Chase) Fined $920 Million


London Whale scandal to cost JP Morgan $920m in penalties

US's biggest bank to pay penalties to US and UK regulators for 'unsound practices' relating to $6.2bn losses last year
JP Morgan
JP Morgan's admission of wrongdoing is a major victory for the US securities and exchange commission. Photograph: Lucas Jackson/Reuters
JP Morgan has agreed to pay about $920m in penalties to US and UK regulators over the "unsafe and unsound practices" that led to its $6.2bn London Whale losses last year.
The US's biggest bank will pay $300m to the US office of the comptroller of the currency, $200m to Federal Reserve, $200m to the securities and exchange commission (SEC) and £137.6m ($219.74m) to the UK's financial conduct authority.
JP Morgan admitted wrongdoing as part of the settlement, an unusual step for a finance firm in the crosshairs of multiple legal actions.
"JP Morgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses," co-director of the SEC's division of enforcement, George Canellos, said.
"While grappling with how to fix its internal control breakdowns, JP Morgan's senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company's problems and determine whether accurate and reliable information was being disclosed to investors and regulators."
In a statement the OCC blamed "unsafe and unsound practices related to derivatives trading activities conducted on behalf of the bank by the chief investment office (CIO)", for the fine.
The OCC said its inquiries had found inadequate oversight and governance to protect the bank from material risk, inadequate risk management, inadequate control over pricing of trades, inadequate development and implementation of models used by the bank, and inadequate internal audit processes.
The US authorities are still pursuing JP Morgan. The Justice Department is pursuing criminal charges against some of the bankers responsible for the massive loss. In an indictment unsealed in federal court this week Javier Martin-Artajo, who oversaw trading strategy at the bank's London office, and Julien Grout, a trader who worked for him, were charged with securities fraud, conspiracy, filing false books and records, wire fraud and making false filings to the SEC.
Grout's lawyer said this week that his client was being "unjustly played as a pawn in the government's attempt to settle its highly politicized case against JP Morgan Chase".
The bank also faces another fine from the commodity futures trading commission which is still investigating whether the bank is guilty of market manipulation.
Jamie Dimon, the bank's chairman and chief executive, initially dismissed the mounting losses at the bank's London offices as a "tempest in a teapot". In a statement Dimon said: "We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company."
This week in a letter to staff he warned: "Unfortunately, we are all well aware of the news around the legal and regulatory issues facing our company, and in the coming weeks and months we need to be braced for more to come."
The admission of wrongdoing is a major victory for the SEC. US judges in recent years have questioned fines where banks were allowed to neither admit nor deny wrongdoing. Judge Jed Rakoff blocked a 2011 SEC settlement with Citigroup because he said the lack of an admission of wrongdoing made it impossible for him to determine whether the fine was "fair, reasonable, adequate and in the public interest".
John Coffee, Adolf A Berle professor of law at Columbia Law School, described the fine as "somewhat less than satisfactory".
"The victims of this enormous loss were the shareholders of JP Morgan and the remedy is for those shareholders to pay $900m-plus in fines. It's not just adding insult to injury, it's adding injury to injury.
He said no senior bank official had been charged with wrongdoing and described the those indicted so far as "relatively small fish".
"Ideally the regulators should fine actual individuals who are responsible. But time and again the SEC settles for large penalties and gives virtual immunity to some officers."

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Thursday, September 19, 2013

Official State Terror - Whistleblowers' Nightmare


Will Eric Holder guarantee NSA reporters' first amendment rights?

The US attorney general vows not to prosecute journalists, but his criminalisation of whistleblowers undermines that assurance
Supporters of Edward Snowden at a congressional hearing in Brazil on NSA surveillance
Supporters of Edward Snowden at a congressional hearing in Brazil on the NSA's surveillance programmes. Photograph: Ueslei Marcelino/Reuters
Another week and another wave of stories on the NSA and the unconstitutional out-of-control surveillance state hit the digital newsstands, showing once again why the tide is turning. Some revelations are so surreal, it's hard not to assume they're satire. NSAchief Keith Alexander seems to be modeling his ambitions and visions for international spying after General Curtis LeMay's views on nuclear war.
Meanwhile, despite the massive smear campaign against Edward Snowden, opinion polls stand clearly with the truth-tellers. People knowthey have a right to know what the government is doing in their names.State secrecy is on the run, while American privacy, long rumored dead, is alive and kicking and wants the fight out in the open – in the sunlight and in the public square.
Last month, though, Glenn Greenwald's partner, David Miranda, was detained at Heathrow airport for almost nine hours, while on a journalistic mission paid for by the Guardian. His electronics were seized, and he was forced to hand over his social media passwords under the threat of imprisonment. He was detained under the UK Terrorism Act – for an act of journalism. This was an assault on press freedom that should make every reporter shudder no matter their opinion on the NSA.
The message was sent. It gave a whole new meaning to "Miranda rights". A Miranda warning, in effect.
Perhaps worse, we learned a few days later that the United States had been given a "heads up" by their British counterparts that they were planning on detaining Miranda. The US government didn't lift a finger to stop this blatant attack on journalism and press freedom – even as it has been moving heaven and earth to bring Edward Snowden back to the US. That should be a scandal in its own right.
Now, the US owes its citizens and the international community another "heads up": on whether the United States will do the same to journalists working on NSA stories who are entering the United States. Put simply, will Attorney General Eric Holder, the US State Department, and the FBI promise safe passage to journalists, their spouses and loved ones, and vow not to interfere with their reporting on these NSA stories?
So far, the answer has been far from clear.
Glenn Greenwald and Laura Poitras, the two American journalists at the center of these stories, have been doing their reporting from Brazil and Germany respectively. The US government has not, so far, stated publicly whether they can enter the country without receiving the same outrageous treatment that Miranda received. Or worse.
Can they practice journalism in the United States, without their hard drives being confiscated, without an unconstitutional search-and-seizure taking place at the border? Are they free to enter the United States without being served a subpoena, or even jailed? Unlike the UK, the United States is supposed to be bound by the first amendment of the constitution, which exists to bar such treatment of journalists.
Poitras, a filmmaker and journalist universally respected in her field, has already been a victim of the ever-expanding surveillance state: since her widely praised film My Country, My Country debuted in 2006, she has been detained while crossing the US border over 40 times. She is editing her upcoming film on whistleblowers in Berlin, because of fears her footage will be seized in the United States
She's not alone. Jacob Appelbaum, a security researcher, a Tordeveloper and journalist in his own right, has been harassed while going over the border for years, simply by virtue of his association withWikiLeaks, whose "crime", apparently, is publishing government secrets in the public interest – something we know established newspapers do all the time.
I should note that I consider both Glenn and Laura friends, as we all sit on the board of the Freedom of the Press Foundation (FPF) together. But the reason this should concern not only me and the FPF, but everyone in the US, is not because of any specific people; we must look at these assaults from a broader perspective.
We care about the individual journalists under attack – Greenwald, Poitras, Appelbaum, Miranda, Julian Assange, James Risen – and the whistleblowers themselves – Snowden, Thomas Drake, John Kiriakou, Chelsea Manning, Julia Davis, Russ Tice – in all these fights. But it's not just the risk and courage of the individuals that inspire and call us to action.
We recognize that when the individual rights are being violated, that means my rights, our rights, are being violated too. What happens to individuals in the US happens to the first amendment. Our politicians must have forgotten the basics we all learned in high school civics class.
That's what the FPF was founded for: we needed a movement protecting the first amendment in its broadest reach.
As FPF co-founder and iconic whistleblower Daniel Ellsberg told me last week:
I've been waiting 40 years for Edward Snowden, and his revelations are the most important in US history, including the Pentagon Papers.
Despite the importance of his revelations, the US purposefully stranded Snowden in Russia by canceling his passport while he was in transit from Hong Kong to Russia, essentially forcing him into exile.
We already know the government will attempt to intimidate and crush whistleblowers who challenge national security state orthodoxy. Genuflect and get in line – or pay the heavy cost. Look no further than Thomas Drake, Bill Binney, and J Kirk Wiebe, three NSA whistleblowers whose homes were raided and lives were destroyed for the cardinal sinof informing the American public about crimes committed by their government.
It's hard to blame Snowden for not wanting to come back and rot in a US jail. Chelsea Manning spent three years in jail awaiting trial, nearly a year of it in torturous conditions. She has now been sentenced to 35 years in prison for leaks exposing war crimes, which have been almost universally acknowledged as having caused no real harm to the US, while those recorded in the "Collateral Murder" video have gone uncharged.
Mr Snowden may have the faint suspicion that his rights would not be protected – given that a prosecution under the Espionage Act would leave him no way to mount a public interest defense if he came back to stand trial. Often, we export our US ideals, sometimes rightfully, sometimes tragically. Now, our action is drenched in irony: Russia is providing safe haven to our American whistleblower, and East Berlin, where the Stasi once roamed, is now where journalists and privacy rights advocates feel safe to work.
Not so in the US these days, it seems. Whether whistleblower, source or journalist: expose crimes, become the hunted. What must students think when they see some of the brightest minds – and the fiercest watchdogs – of a generation unable to practice journalism in America?
Hunter S Thompson once said:
History is hard to know, because of all the hired bullshit, but even without being sure of "history" it seems entirely reasonable to think that every now and then the energy of a whole generation comes to a head in a long fine flash, for reasons that nobody understands at the time– and which never explain, in retrospect, what actually happened.
He spoke of the end of something – a great wave and the attendant forces and counterforces at play. Now one can feel the rising tide and a see a new wave forming on the edge of the break. Perhaps, soon we can paraphrase the Good Doctor: and with the right kind of eyes almost see the high-water mark of the surveillance state… that place where the wave finally broke and rolled back.
If we want that moment, we need to stand with those brave enough to confront the crimes of our current national security state. Just two months before the UK gave the US its absurd "heads up" about David Miranda's detention, Eric Holder vowed not to prosecute journalists, saying:
The Department [of Justice] has not prosecuted, and as long as I'm attorney general, will not prosecute any reporter for doing his or her job.
That begs the question: will the attorney general, as chief law enforcement officer of the country, now go on record that he will guarantee the safe return and safe passage of journalists who have exercised their rights under the first amendment?
Or would we accept the creation of a generation of exiled watchdogs, who are trying to hold their government accountable from afar?
• This article received some minor editorial amendments at the request of the author, at 1pm (ET) on 18 September
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