JPMorgan Chase is paying $153.6 mllion to settle a civil case the Securities and Exchange Commission brought against them on charges that they defrauded investors regarding mortgage securities, Reuters reports.
CBS News says that JP Morgan “failed to tell investors that a hedge fund helped select the investment portfolio and then bet that the portfolio would fail,” according to the SEC. CBS says that a cross spectrum of society lost money on the deal, including General Motors staffers, a religious financial group, and a retirement services organization. The $150 million in investments went south in just 10 months, Reuters says.
Among the evidence used in the case were JPMorgan internal emails “that indicated bankers sold a collateralized mortgage obligation in 2007 to ensure that it could get credit-scarred mortgage securities off its books,” Reuters reports.
A March 2007 email from the DSO distribution department head said to sales staffers, “We are soooo pregnant with this deal, we need a wheel-barrel to move around. Let’s schedule the cesarian, please!”
Last year, Goldman Sachs paid $550 million to settle a similar civil claim. CBS News notes that the $153.6 million settlement amounts “to less than 1 percent of the bank’s 2010 net income of $17.4 billion — or less than what JPMorgan earns in one week.”
Columbia University law professor John Coffee said, “This is deja vu all over again. If Goldman and JPMorgan were doing this, it wouldn’t surprise me if others were as well.”
In addition, the SEC announced charges against Edward Steffelin, whose GSCP investment firm worked on the deal with JPMorgan, with misleading investors. But Alex Lipman, Steffelin’s attorney, accused the SEC of using him as a scapegoat “to attach a name and a face” to the issue.
The SEC also announced that all the investors would get back their money lost in the case.
Lisa Swan, a former senior new media editor at the New York Daily News, is a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in Yahoo Sports, Huffington Post, Heater Magazine, and the upcoming book Graphical Player 2011.