Tag Archives: JP Morgan

Business, Economy, Politics, US

JP Morgan Chase Whistleblower Reveals Bank and Fed Cover-Up of Fraud

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Securities Lawyer, and former employee of JP Morgan Chase, Alayne Fleischmann, recently spoke out about her experience with the bank, in an interview with Rolling Stone, and revealed the government’s involvement with the “biggest cases of white-collar crime in American history.”

Fleischmann began working for JP Morgan Chase as a deal manager in 2006. She first noticed problems when a new “manager for diligence” was hired to review loans, and he insisted that the employees stop sending him emails. Fleischmann noted that he was “wary of putting anything in writing when it came to its mortgage deals.”

“The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing,” said Fleischmann. “So to have exactly the opposite of that – that was very worrisome.”

The errors continued, and Fleischmann told Rolling Stone that when she raised concerns about “toxic loans,” she found the number crunchers who had also been complaining about the loans “suddenly began changing their reports.”

Fleischmann explained the changes by saying that the head diligence manager started “yelling at his team, berating them, making them do reports over and over, keeping them late at night,” in the same way an interrogator “verbally abuses the target until he starts producing the desired answers.”

“Everything that I thought was bad at the time turned out to be a million times worse,” Fleischmann said.

In 2007, Fleischmann sent a letter to William Buell, a managing director at JP Morgan Chase. According to Rolling Stone, Fleischmann’s letter “warned Buell of the consequences of reselling bad loans as securities and gave detailed descriptions of breakdowns in Chase’s diligence process.”

“It used to be if you wrote a memo, they had to stop, because now there’s proof that they knew what they were doing,” said Fleischmann. “But when the Justice Department doesn’t do anything, that stops being a deterrent. I just didn’t know that at the time.“

Fleischmann was terminated from the company in the midst of a round of lay-offs in 2008. An investigator from the U.S. Securities and Exchange Commission contacted her in 2012, regarding her knowledge of the events that occurred during her time at JP Morgan Chase. While the investigators were interested in certain parts of her story, it was not until 2013 that she was able to relay her full knowledge. This included “the edict against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were ignored, all of it.”

However, rather than taking JP Morgan Chase to court, Rolling Stone noted that the government “decided to help Chase bury the evidence,” which began when a press conference to announce the civil-fraud charges against the bank, scheduled by Attorney General Eric Holder for September 24, 2013, was “suddenly canceled, and no complaint was filed.”

“Every time I had a chance to talk, something always got in the way,” said Fleischmann. She explained that while it originally seemed like the U.S. government was interested in her testimony, and in brining justice to the crimes committed by JP Morgan Chase, she learned that it was the opposite.

The Justice Department’s political wing, led by Eric Holder, “appeared to be using her, and her evidence, as a bargaining chip to extract more hush money” from JP Morgan Chase CEO Jamie Dimon. The Department succeeded in doing this, and they were paid $9 billion by Dimon in a settlement that released JP Morgan Chase from civil liability.

Fleischman admitted that telling her story, and taking both JP Morgan Chase and the Justice Department to task could have serious ramifications.

“I could be sued into bankruptcy. I could lose my license to practice law. I could lose everything,” said Fleischmann. “But if we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.”

Featured, Technology, US

76 Million Households Affected by JP Morgan Data Breach

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On Thursday, JP Morgan Chase, one of the leading banks in the United States, released a report admitting that the hacking of its computer system, which began in June and was discovered in July, had a much larger impact than the bank originally speculated.

The invasion, which The Guardian is referring to as the “largest of its kind ever discovered,” affected the accounts of 76 million households and seven million small businesses.

In a regulatory securities filing from the bank, it claimed that, “As of such date, the firm continues not to have seen any unusual customer fraud related to this incident.”

The bank maintained that while the names, addresses, phone numbers, and email addresses of account holders had been seized by hackers, no financial information, social security numbers, birth dates, or passwords had been compromised.

Bloomberg reported that hackers also obtained internal data from JP Morgan customers, which identified them by the type of category they were in, such as “private-bank, mortgage, auto or credit-card divisions.”

According to the New York Times, the hackers “appeared to have obtained a list of the applications and programs that run on JP Morgan’s computers,” and they used that list to “crosscheck with known vulnerabilities in each program and web application, in search of an entry point back into the bank’s systems.”

The Guardian reported that JP Morgan is “working with the Federal Bureau of Investigation and the US secret service to determine the roots of the attack.”

“Reality is dawning among regular corporations that you can’t keep these guys out,” said security expert, Brian Krebs. “The most you can do is stop the bleeding. It’s not clear yet how well that worked here. A month is a long time.”

While the 76 million households affected stands as the largest number in the financial realm, it goes on record with the 110 million personal records taken when Target’s system was hacked last year, and the 145 million who were affected when EBay was hacked earlier their year, according to Bloomberg.

In a memo sent to JP Morgan employees, Chief Operating Officer, Matt Zames, wrote that the breach was “highly unfortunate,” and that employees should use it as a reminded that they must be “increasingly vigilant in the cyber world.”

International

Vatican Bank Scandal — JP Morgan, HSBC Cease Doing Business with Vatican

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An 11-month Financial Times investigation reveals mismanagement at Vatican Bank

Many do not realize that the Vatican manages a banking empire with approximately $7 Billion in assets.

On June 28th, a Vatican cleric, along with a former Secret Service agent, and a financial broker were all arrested by Italian police and charged with fraud and corruption. The three were suspected of smuggling $24 Million by private plane across the border from Switzerland.

Prosecutors allege that the the Vatican cleric who is a former banker, was using the Institute of Religious Works (The formal name for the Vatican Bank) to transport money for Naples businessmen. In Italy, Naples is considered the base for organized crime. The arrested Vatican cleric was also the head of accounting at the Treasury of the Vatican (Administration of the Patrimony of the Holy See.)

This is another shock to Italy following upheaval of Pope Benedict XVI’s resignation in February, the first time in 700 years a pope has resigned. The scandal gave the Bank of Italy under Mario Draghi as well as BIS in Brussels the impetus it needed to start investigations and potential regulatory changes at the Vatican Bank.

Cardinals elect new pope

DAMAGE CONTROL

In July, Peter Sutherland, a non-executive chair at Goldman Sachs International, and the former Attorney General of Ireland, flew to the Vatican. He is a practicing Catholic and unpaid consultant to the Vatican’s Treasury, and was invited by reformers inside the Church to speak to the Council
of Cardinals, the most senior advisors to the Pope. He did not give a public statement, but two who were aware of the closed door proceedings indicate he advised the Council, “Transparency is necessary.”

Regulators have already been eager to get into the Vatican before the arrests. “We cannot have any more scandal. It is so shameful,” a senior member of the Vatican’s financial administration said.

Financial Times interviewed two dozen bankers, lawyers, regulators, and Vatican insiders over 11 months to understand how the Vatican Bank has unnerved bankers, regulators, and governments across Europe and the U.S. The reforms inside Vatican Bank now underway are due to pressure from banks
like Deutsche Bank, JP Morgan, HSBC, and UniCredit, all who have found themselves as targets of regulators due to their business relationship with the Holy See.

REGULATORY NIGHTMARE, BANKING STANDARDS NOT MET

About 32 of the world’s largest financial institutions were “correspondent” banks for the Vatican. They moved about $3 Billion per year from the Vatican Bank to other banks around the globe, allowing the Church to conduct international business. The banks became so fearful of being tarnished by the Vatican that some have even closed down their accounts for the Embassies of the Vatican. HSBC did cease doing business with the Embassy of the Vatican, and other large banks are considering the same. Regulations and oversight around diplomatic bank accounts and PEP’s (politically exposed persons) has become crushing to the banks, and they no longer seek out these customers. Banks have tremendous surveillance around account owned by those who work high up in any government, especially embassy accounts. It is a large cost and risk to the banks, and they loathe doing business with these customers.

In March 2012, JP Morgan closed the bank accounts it held for the Vatican because the documentation provided was not thorough. Vatican was asking JPM to move money all around the world for it via wire transfers but the basic Know Your Customer data could not be obtained. When JPM would say, “we need to answer to the regulators on these wire transactions” the Vatican Bank would push back and say, “We answer to God,” according to a bank
manager at a large European bank.

http://www.bbc.co.uk/news/uk-23565506

http://uk.reuters.com/article/2012/03/19/uk-vatican-bank-idUKBRE82I0P820120319

MONEY FUNNELED TO EFFECT POLITICAL CHANGES, EVADE TAXES

Many bankers, lawyers, and those in business with the Vatican Bank would not speak on record but they did say the Vatican Bank operates unlike any other bank they’ve dealt with. The staff of only 12 were not versed in Due Diligence or KYC (Know Your Customer) standards. There was very little documentation on their cash flows and balances of approximately 19,000 clients. There are 33,000 accounts held
at the Vatican Bank. 50% of clients come from religious orders, 15% are from Holy See institutions, 13% are Cardinals, Bishops, and clergy, 9% are from dioceses around the world. The rest have some affiliation with the Catholic Church. The Vatican Bank doesn’t have many loans, the books contain mostly deposits, wire transfers, and investments.

Many of the deposits are donations and cash tithe. 25% of the bank’s business is done in cash. Laura Pedio, a Milan ani-Mafia prosecutor who specializes in white collar crime, was willing to speak on the record to Financial Times. In her previous cases she found a complex system of proxies, with transaction authorization given to the third parties on behalf of unidentified account holders. The proxy holders had no details
recorded at the bank. Some of the proxies could only be verbally recognized by a few people at the Vatican Bank. She said there was no way to get answers on who these people were, or who was the final beneficiary of the account.

One advisor to the Vatican says the new clampdown by regulators has caused the correspondent banks to toss aside the Vatican and stop doing business with them. “There is a no nonsense approach from the correspondent banks,” the advisor said in an interview. “We are not here to cover the ass of the Vatican.”

The most infamous story so far around the Vatican Bank was their relationship withe a large Italian bank that collapsed. The Vatican Bank was the single largest shareholder in Banco Ambrosiano. After that bank collapsed, it’s chairman was found hanged under London’s Blackfriar’s Bridge. Prosecutors in Rome conclude the bank chairman was killed by the Sicilian Mafia but no charges were brought up against an individual. There have been rumors that the Vatican is a large shareholder of Bank of America but this has not been substantiated.

Mafia victim & bank chairman: Roberto Calvi

Another question is how the Vatican may funnel money into political actions. Pope John Paul II is said to have used the Vatican Bank to channel money to Poland’s Solidarity Movement. Questions arise as to is and how the Vatican may be swaying elections or effecting political change worldwide. Regulators have been cracking down on tax cheats in offshore havens like Switzerland.

FIRST POPE IN 700 YEARS RESIGNED IN FEBRUARY, NEW POPE WITH MAMMOTH PROBLEMS TO FIX

As of March 2013 their new Pope, who is a Jesuit evoking poverty and humility, set a new tone on financial correctness. The new Pope spoke out against the idolatry of money, “all-compassing corruption,” and “Tax evasion that had reached global dimensions.” The new Pope moved his personal residence away from the Apostolic Palace and the Vatican Bank.

The new Pope has issued papal decrees to help speed inspections and make changes to produce real reform in the legal and institutional framework of their banking system.