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Chase at Very Center of Bernie Madoff Fraud

In a perfect world, the white collar crooks involved in this fraud would lose their freedom, and their business would be disbanded. As we all know, this won’t happen, J.P. Morgan Chase will pay a token settlement, and all the bankers will go home to their country estates unscathed.

A Fool Too Long

In a perfect world, the white collar crooks involved in this fraud would lose their freedom, and their business would be disbanded. As we all know, this won’t happen, J.P. Morgan Chase will pay a token settlement, and all the bankers will go home to their country estates unscathed.

Senior executives at JPMorgan Chase expressed serious doubts about the legitimacy of Bernard L. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him, according to internal bank documents made public in a lawsuit on Thursday. Enlarge This Image

On June 15, 2007, an obviously high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”

Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.

Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right up until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds , according to the litigation.

The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.”

(click here to continue reading JPMorgan Said to Have Doubted Madoff Long Before His Scheme Was Revealed – NYTimes.com.)

WSJ adds:

J.P. Morgan Chase & Co. stood “at the very center” of Bernard Madoff’s fraud, according to a lawsuit unsealed Thursday that reveals for the first time how bank employees’ concerns allegedly went unheeded and irregularities in his accounts were overlooked.

The $6.4 billion lawsuit, filed in December and unsealed in federal bankruptcy court Thursday, says J.P. Morgan reported its long-held suspicions of Mr. Madoff to British authorities in late October 2008, less than two months before he surrendered and the fraud was exposed.

The 115-page lawsuit, which seeks the return of $1 billion in J.P. Morgan’s profits and fees, and $5.4 billion in damages, also goes into great detail about the bank’s efforts, starting in about 2006, to make money by offering products tied to Mr. Madoff through investment funds that fed money to him.

It also says the bank didn’t pay attention to billions of dollars passing through the Madoff’s firm’s main J.P. Morgan account, much of it by hand-written check, or discrepancies in the account balance and unreported obligations, including a $95 million loan.

“They had, legally, an obligation to make inquiry, and they didn’t,” said David Sheehan, an attorney for Irving Picard, the trustee recovering losses for victims of the Ponzi scheme. “You’re literally seeing millions of dollars going in and out on a daily basis, and not one phone call is being made.”

(click here to continue reading Madoff Trustee’s Suit Says J.P. Morgan at ‘Very Center’ of Fraud – WSJ.com.)

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