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JP Morgan Holding Back Madoff Documents

Posted by Larry Doyle on January 4, 2013 11:57 AM |

Four years after the fact and America still does not know what really transpired within the Madoff scandal. Who knew what? Who did what?

Are we supposed to believe that only Bernie and a few other miscreants within his web perpetrated this scam unbeknownst to others on Wall Street and within the halls of our financial regulators? That premise would take the definition of naivete to an exceptionally elevated level.

What other entities benefited from feeding off Bernie Madoff? Well, if we needed to rely on the likes of JP Morgan, we will seemingly never learn that info and likely more. Why is that? 

Bloomberg reports this morning that JP Morgan is refusing to turn over documents relating to its interaction with Madoff as requested by the US Treasury. Bloomberg writes:

JPMorgan “had financial reports in its possession that clearly evidenced fraud,” David J. Sheehan, lead counsel for Picard and a partner at Baker & Hostetler LLP, said in a February 2011 statement. JPMorgan was the Madoff firm’s “primary banker for more than two decades,” Sheehan said.

Perhaps instead of requesting the documents, the Treasury should be mandating that JPM turn over the documents. Additionally, hearing that JPM is working with regulators on this front inspires little to no confidence. Why so? All too often, the cover of “regulators signed off” or “regulators were made aware” has been Wall Street’s “get out of jail free” card.

People here in America and increasingly around the world are learning that the cronyism between the big banks, the pols, and the regulators comes with a very steep price for the general public and those who care about free and fair markets.

Thank you to a regular reader for sharing a story recently published in Australia that addresses this fact. From the Sydney Morning Herald, we read of The Four Business Gangs That Run The US:

Sachs says four key sectors of US business exemplify this feedback loop and the takeover of political power in America by the ”corporatocracy”.

First is the well-known military-industrial complex. ”As [President] Eisenhower famously warned in his farewell address in January 1961, the linkage of the military and private industry created a political power so pervasive that America has been condemned to militarization, useless wars and fiscal waste on a scale of many tens of trillions of dollars since then,” he says.

Second is the Wall Street-Washington complex, which has steered the financial system towards control by a few politically powerful Wall Street firms, notably Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and a handful of other financial firms.

Third is the Big Oil-transport-military complex, which has put the US on the trajectory of heavy oil-imports dependence and a deepening military trap in the Middle East, he says.

Fourth is the healthcare industry, America’s largest industry, absorbing no less than 17 per cent of US gross domestic product. ”The key to understanding this sector is to note that the government partners with industry to reimburse costs with little systematic oversight and control,” Sachs says.

Fortunately, things aren’t nearly so bad in Australia. But it will require vigilance to stop them sliding further in that direction.

Will America ever be able to regain a spirit of real capitalism or are we resigned to sliding further into the crony abyss? This registered Independent, fiscally conservative blogger is sickened by the cronyism and welcomes calling out the pigs in hopes that our children and children’s children might have a better future.

Unbeknownst to many people, current JPM Counsel Stephen Cutler formerly worked at the SEC back in the early years of this century. While there, he was involved in the supposed investigation or lack thereof of the Madoff enterprise. Having worked his way through a revolving door from the SEC and ultimately to JPM, one would think Mr. Cutler might possess a wealth of information in regard to Madoff.

Would seem that the stench of the Wall Street-Washington incest has not lessened a bit over the last four years.

Navigate accordingly.

Larry Doyle

Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Russ


    Thanks for writing this. It truly hits the nail on the head.

    It is shocking that the judicial system of the US will not allow the trustee to sue the complicit banks (like JP Morgan) but will allow the trustee to pursue the VICTIMS of the crime perpetrated by those banks.

    The world has turned upside down in the USA.

  • Peter Scannell

    Ah that Cutler’s a favorite sociopath of mine.

    Cutler’s SEC Enforcement Division lets Bernie go as early as 2001 (see above). Cutler’s SEC Enforcement has would be whistle-blower from JP Morgan, Peter Sivere, fired from JP Morgan when he attempted to disclosed huge mutual fund short-term trading at the firm that was not being disclosed in an SEC investigation– saving JP Morgan more than $100 million in additional fines and restitution.

    And Cutler is not done yet.

    SEC Enforcement Directors Cutler/Thomsen then has would be dutiful SEC Enforcement Division investigator Gary Aguirre terminated from the Commission for having the audacity to push for an insider trading investigation involving Wall Street titian John “Mack the Knife” Mack from Morgan Stanley and Author Samberg of Pequot Capital Management. Senator Grassley picks up on the cause which ultimately led to Author Samberg closing the massive hedge fund and Samberg paying a $28 million dollar fine to the SEC.

    Cutler then leaves the SEC for his old law firm Wilmer Cutler Pickering Hale and Dorr for the customary quite period before the big payoff.

    Cutler then collects on his good deeds, not the lead counsel job at Morgan Stanley as was rumored at the time – that was even too predictable for his shamelessness. Cutler collects his gratitude from JP Morgan. After all one good hundred million dollar favor deserves, and needs to be acknowledged.

    Funny, just about the same time as Cutler collects his massive up front stock award on his second day on the job at JP Morgan, JP Morgan starts doing big business with Bernie. JP Morgan invests $250,000,000 with Bernie through feeder funds. JP Morgan has handle Bernie’s business for decades. JP Morgan actually has Bernie’s personal checking account of which Bernie wrote hand written checks to himself and others from the proceeds of his scheme. That checking account certainly could be a foretelling document if someone was concerned about Bernie’s liquidity. Then as good fortune has it for JP Morgan, the firm cashes out of the ponzi scheme right before the shit hits the fan! JP Morgan was the only institutional account that was able to escape the wrath of Bernie and company with all their investment and profit in tact!

    And Cutler’s not yet. As the financial sky is falling and big banks are wobbling, Cutler decides to give his protégé at the SEC, Enforcement Director Linda Thomsen a weekend phone call at her home. Was it just a little chat? Actually the purpose was to garner non-public information from the SEC regarding the standing of Bear Stearns in the regulator’s eye. It was said that Cutler did receive assurances – though not broad according to the former SEC OIG David Kotz (for whatever that’s worth, wink,wink). Cutlers firm then puts in the low ball number– attempting to screw every pension and mutual fund on earth out of billions. Thankfully, a more appropriate figure was later determined to be the worth of the defunct firm after the public outcry.

    But I have left out one other matter for now – let’s just say I am the only one that has forced Cutler to have to testify under oath. And let me suggest – candid he was not.

    Former SEC Enforcement Director Stephen M. Cutler, his former doll Deputy of SEC Enforcement, Linda Thomsen, along with the former SEC Director of Investment Management, Paul Roye, and his former doll, SEC Director of Compliance and Examinations, Lori Richards, have as a group caused more devastation to our nation’s financial markets than anyone will ever comprehend.

    Now let our Congress investigations get back to what every American is concerned with – did Roger Clemens take steroids in Montreal in 1999!

    Where the hell are the cops!

    Where the hell are the Congressional investigations!

    Hells bells baby, if you can’t beat’em in court – beat’em in the street!

    • Peter Scannell

      Here’s a question Cutler could have asked Bernie, “What third party has custody of your investors savings?”

      In your checking account?

  • Peter Sivere

    Sounds very familiar. What prevents the FBI from getting involved? If this was a two bit insider trading investigation there would be wire taps and morning raids.

    Perhaps a whistleblower will appear? Although, JPM is pretty good at vetting them out to keep it all in the family.

  • Obsvr-1

    LD wrote … “Would seem that the stench of the Wall Street-Washington incest has not lessened a bit over the last four years.”

    I continue to repeat, Washington and Manhattan are the modern day equivalent to Sodom and Gomorrah !!

    Since JPM is regulated by the FED, then the FED should revoke JPM’s charter until they are forthcoming with the documents.

  • Peter Sivere

    Another JPM investigation where it fights to release E-mails.

    JP Morgan Guards E-mails in Energy Markets Probe

  • Peter Sivere

    Better yet, they fail to perserve E-mail (how convenient).

    This action concerns Respondent’s violations of the record-keeping requirements of Section 17(a) of the Exchange Act and Rule 17a-4 thereunder during the period of July 1, 1999 to June 30, 2002 (the “relevant period”). During all or part of the relevant period, Respondent failed to preserve for three years, the first two of which in an easily accessible place, all electronic mail communications (including inter-office memoranda and communications) received and sent by its employees that related to its business as a member of an exchange, broker or dealer. Respondent lacked adequate systems or procedures for the preservation of electronic mail communications. The Commission, NYSE, and NASD (collectively, “the regulators”) discovered these deficiencies during an inquiry into the supervision of Respondent’s research and investment banking activities.

    United States of America before the Securities and Exchange Commission in the matter of JP Morgan Securities, Inc.

  • Peter Sivere

    How can JPM and their outside counsel be trusted? There is a definite pattern going on here…..

    After FERC subpoenaed documents from JPMorgan, the bank claimed attorney-client privilege over 53 emails. According to the regulator’s petition, it pressed for details on the privilege claim and received no fewer than five written assurances from the bank’s counsel at Sutherland and Skadden, Arps, Slate, Meagher & Flom that all of the material was protected. Yet in May and June of this year, JPMorgan eventually admitted that 28 of the supposedly privileged emails actually didn’t contain protected legal advice. Given that some of the remaining 25 emails weren’t directly to or from lawyers — and that some of the emails over which JPMorgan initially claimed privilege contained manifestly unprotected communications — FERC said the bank couldn’t be trusted. That’s why it went to court to compel JPMorgan to either turn over unredacted versions of the disputed emails or, at least, show them to a judge to prove they’re privileged.

    Attorney-Client Privilege Claim Backfires on JPMorgan in FERC Case

  • jim wells

    Perhaps the Treasury Department can borrow the “Big Boy Pants” the OCC used in finally conducting an honest and objective CRA examination of a Too Big To Behave Bank, which resulted in not 1 but 2 downgrades of JPM Chase’s rating in 6-months. Apparently the OCC found the outfit too uncomfortable and put it back in the closet when it came to enforcing the Dodd-Frank Act’s derivative provision that would have curbed the mega-banks’ casino gambling operations. What a shame that all the federal enforcement agencies lack testicular fortitude when it comes to the big banks.

    • Randee

      “Big Boy Pants,” “Too Big to Behave” and “Testicular Fortitude.” Congratulations, you managed to work three of the most overused cliches in vogue today into a brief post. If there is an award for hack writing, you’ve won it.

      I will defend JP Morgan as a private company led by one of the great financial minds of our era, Jamie Dimond. Warren Buffett vouches for Dimond and that’s good enough for me. I also know that over the past year JP Morgan Chase, despite the controversies, has been a wonderful investment and I’m glad I own it.

  • LD


    What has been the return on the wonderful JPM stock over the last three years?

  • Obsvr-1

    Randee must be J. Dimon’s alias…. uck

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