Strategic CS Labels Record $2.6 Billion Legal Settlement by JP Morgan as a Sign that Financial Reform is Still Required

January 23, 2014   Business News
(PRLEAP.COM) New York January 23, 2013 Strategic Consulting Services (www.strategiccs.org), a New York firm providing client-focused financial consulting for consumers, regards the recent settlement of $2.6 billion by JP Morgan in the Bernard Madoff Ponzi case as a sign that financial reform is still necessary in the United States. As the Nation's largest bank announces it will pay the largest penalty against a bank in U.S. history (instead of challenging allegations it aided the largest financial fraud in history), there are still lingering questions about how such a massive fraud could go undetected and why no additional indictments have been issued.

In December of 2008 Bernard "Bernie" Madoff was arrested by FBI agents after extensive investigation by the U.S. Securities and Exchange Commission for securities fraud. Months later he pleaded guilty to 11 federal felonies for organizing a massive Ponzi scheme that defrauded thousands of investors out of billions of dollars. Between $20 to 65 billion went missing from client accounts and falsified gains. As a result, Madoff was sentenced to the maximum prison sentence of 150 years as prosecutors believe the fraud goes back 20 years or more.

As investigators researched the case, JP Morgan is alleged to have played a central role in Mr. Madoff's fraud. Money from his investors had been processed through JP Morgan accounts, including his primary checking account which had billions of dollars of activity. During this time JP Morgan had a direct view into the flow of money through Mr. Madoff's accounts but made no substantial effort to investigate fraud and failed to file a Suspicious Activity Report (SAR) for transactions as required by law. For JP Morgan's involvement and lack of action, the bank will pay a $1.7 billion penalty settlement to cover two felony violations of the Bank Secrecy Act. Days later it was announced JP Morgan would also pay settlements to the Office of the Comptroller of the Currency and the trustee for Bernard L. Madoff Investment Securities for a combined $893 million bringing their total legal settlements to $2.6 billion.

In the wake of the financial collapse, the Maddoff scheme is a storybook case of the loose policies and insufficient oversight that led to financial reform in the form of the Dodd-Frank Act and the recently approved "Volcker Rule". However since the Madoff story broke and JP Morgan was implicated, no JP Morgan employee has been accused of wrongdoing With the financial bailout, it appears that banks can be both too large to fail and too large to jail, even as records show the bank had enough awareness months before the arrest to reduce its own exposure with Madoff's investment business to only $40 million from its previous $250 million.

"When large banks, and especially the nation's largest bank, can be involved in such massive fraud without losing a step, it is a wakeup call we should respect. The announcement of the record penalty has impacted JP Morgan stock by less than one percent, and two days later their stock price was even up more than a dollar. In this case, paying the staggering $2.6 billion dollar settlement was easier than trying to fight the claim it aided the largest Ponzi scheme in history," says Ben Kittle, Senior Financial Consultant at Strategic Consulting Services. "The positive aspect from this news is that federal prosecutors were persistent and creative enough to pursue the case against JP Morgan to get a settlement that helps Mr. Madoff's victims while highlighting the need for banking reform to ensure this cannot happen again."

About Strategic Consulting Services
Strategic Consulting Services is a financial services firm with teams specialized in Debt Management, Mortgages and Business Services. With a comprehensive client-focused approach, the Company provides assessments looking beyond immediate financial issues to help clients build greater financial strength with smart habits and choices. Since 2007, Strategic Consulting Services has helped individuals and small businesses create savings plans, reduce debt, and make wiser spending choices. For more information visit www.strategiccs.org.
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