JPMorgan Chase & Co. has entered into an agreement with the Justice Department to resolve the companys role in anticompetitive activity in the municipal bond investments market, agreeing to pay $228 million in restitution, penalties and disgorgement of ill-gotten profits to federal and state agencies.
As part of the agreement, the Justice Department said JPMorgan “admits, acknowledges and accepts responsibility” for the illegal, anticompetitive conduct by former employees at its municipal derivatives desk who entered into unlawful agreements to manipulate the bidding process and rig bids on municipal investment and related contracts.
The department said the contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.
“By entering into illegal agreements to rig bids on certain investment contracts, JPMorgan and its former executives deprived municipalities of the competitive process to which they were entitled,” said Assistant Attorney General Christine Varney, who heads the department’s Antitrust Division.
“Todays agreements ensure that JPMorgan will pay restitution to the municipalities harmed by its anticompetitive conduct, disgorge its profits from the illegal activity and pay penalties for the criminal conduct,” she said. “We are committed to rooting out anticompetitive activity in the financial markets and our investigation into the municipal bond derivatives industry, which has led to criminal charges against 18 former executives, remains active and ongoing.”
JPMorgan, under the agreement, said it would pay restitution to victims and cooperate fully with the Justice Department’s ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry.
To date, the ongoing probe has resulted in criminal charges against 18 former executives of various financial services companies and one corporation.
One of those charged was James Hertz, a former JPMorgan employee. Nine of the 18 executives have since pleaded guilty, including Hertz.
According to Ms. Varney, the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board and 25 state attorneys general also entered into agreements with JPMorgan requiring the payment of penalties, disgorgement of profits and payment of restitution to the victims harmed by the manipulation and bid rigging, as well as other remedial measures.
As a result of its admission of conduct, its cooperation with Justice and other agencies, its monetary and non-monetary commitments, and its efforts to address the anticompetitive conduct, the department agreed not to prosecute JPMorgan for the manipulation and bid rigging of municipal investment and related contracts.