JP Morgan Chase & Co. has agreed to a settlement worth more than $700 million with the Securities and Exchange Commission. The settlement arose out of charges by federal regulators that the Wall Street bank made unlawful payments to friends of public officials to win municipal bond business in Jefferson County. As all Alabamians are painfully aware, the scandal over the county’s $3.9 billion debt has pushed our largest county to the brink of filing what would be the biggest municipal bankruptcy in U.S. history.
Interest-rate swap contracts with the county worth $700 million had been cancelled by JP Morgan in March. JP Morgan will pay a $25 million civil fine, a $50 million payment to the county and will forfeit $647 million in termination fees it claims the county owes from the canceled swap agreements.
The SEC has also filed a lawsuit against two former managing directors of JP Morgan Chase Bank, alleging that Charles LeCroy and Douglas MacFaddin arranged the payment of millions of dollars in bogus consulting fees to two other investment banks that had a “close relationship” with county commissioners. In return, the suit says JP Morgan was paid to structure $5 billion interest-rate swaps, which were a type of insurance agreement that purported to protect the county’s billions in sewer bonds from swinging interest rates.
JP Morgan’s securities division was the managing underwriter of the bond offerings and its affiliated bank served as swap provider for the transactions. JP Morgan failed to disclose any of the unlawful payments or conflicts of interest in the bond offering documents, but passed on the cost of the payments by charging the county higher interest rates on the swap transactions, according to the SEC.
Source: Associated Press
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.