In a letter to U.S. Attorney General Eric Holder, Senator John McCain (R-AZ) expressed concern with reports indicating that the AG personally met with JPMorgan CEO Jamie Dimon in the course of settlement talks between JPMorgan Chase and the Department of Justice (DOJ). The meeting reportedly centered on multiple investigations into JPMorgan's issuance of mortgage-backed securities in the lead-up to the financial crisis. These discussions are taking place while DOJ is also investigating the bank's actions related to the $6 billion "London Whale" trading losses, noted Senator McCain, which the Senate Permanent Subcommittee on Investigations independently investigated.
The Senator described the personal meeting with the CEO of the corporate target of a major criminal investigation, at the request of the CEO, while negotiations on a global settlement agreement are pending, as highly unusual and, under the circumstances that the meeting occurred, giving rise to concern. It is noteworthy that at the same time the bank is facing a litany of regulatory woes that carry hefty fines and potential liability in private civil suits, added Senator McCain, individuals within JPMorgan and other similarly culpable financial institutions have escaped accountability.
JPMorgan's misconduct seriously harmed investors, said the Senator, and any government response relating to these events must hold the proper institutions and individuals accountable. In matters involving major corporate malfeasance, individual accountability is vital to deterring similarly severe misconduct by financial institutions and their officers, directors, or key employees in the future. He emphasized to the DOJ that Government enforcement actions must no longer be viewed by institutions and their management teams as simply the cost of doing business.
With this in mind, Senator McCain asked for a timely responses to a number of specific questions when the settlement agreement is announced. He wants to know if the DOJ is considering requiring admissions of wrongdoing on the part of any individuals within the bank as part of the settlement negotiations and, if not, why not. Also, he asks if the settlement agreement with the company will preclude either civil or criminal enforcement action against individuals at JPMorgan. Relatedly, DOJ is asked if it will seek to hold any top officer, director or key employees within JPMorgan personally accountable for the wrongdoing.
The Senator also asked DOJ to describe how each of the following will be determined and structured in any potential settlement: penalties; fines; disgorgement; compensatory damages and/or restitution; and admissions of wrongdoing. Importantly, how will the DOJ ensure that the settlement provides the proper relief for consumers, queried Senator McCain.
Finally, DOJ must relate if any settlement reached will specify whether JPMorgan is permitted to receive a tax deduction or favorable tax treatment for any resulting restitution, fines or penalties, or will such a determination be left to the IRS. Also, DOJ should relate how will this decision be reached. If deductions are permitted, DOJ should specify which aspects of the proposed settlement will be given favorable tax treatment.