Soon Fleischmanns hopes were raised again. In late 2012 and early 2013, she had a pair of interviews with civil litigators from the U.S. attorneys office in the Eastern District of California, based in Sacramento. One of the ongoing myths about the financial crisis is that the government is outmatched by the legal talent representing the banks. But Fleischmann was impressed by the lead attorney in her case, a litigator named Richard Elias. He sounded like he had been a securities lawyer for 10 years, she says. This actually looked like his idea of fun – like he couldnt wait to run with this case. She gave Elias and his team detailed information about everything shed seen: the edict against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were ignored, all of it. She assumed that it wouldnt be long before the bank was hauled into court. Related bank of america Matt Taibbi on Bank of America: Too Crooked to Fail Instead, the government decided to help Chase bury the evidence. It began when Holders office scheduled a press conference for the morning of September 24th, 2013, to announce sweeping civil-fraud charges against the bank, all laid out in a detailed complaint drafted by the U.S. attorneys Sacramento office. But that morning the presser was suddenly canceled, and no complaint was filed. According to later news reports, Dimon had personally called Associate Attorney General Tony West, the third-ranking official in the Justice Department, and asked to reopen negotiations to settle the case out of court. It goes without saying that the ordinary citizen who is the target of a government investigation cannot simply pick up the phone, call up the prosecutor in charge of his case and have a legal proceeding canceled. But Dimon did just that. And he didnt just call the prosecutor, he called the prosecutors boss, Fleischmann says. According to The New York Times, after Dimon had already offered $3 billion to settle the case and was turned down, he went to Holders office and upped the offer, but apparently not by enough. A few days later, Fleischmann, who had by then moved back to Vancouver and was looking for work, was at a mall when she saw a Wall Street Journal headline on her iPhone: JPMorgan Insider Helps U.S. in Probe. The story said that the government had a key witness, a female employee willing to provide damaging testimony about Chases mortgage operations. Fleischmann was stunned. Until that moment, she had no idea that she was a major part of the governments case against Chase. And worse, nobody had bothered to warn her that she was about to be effectively outed in the newspapers. The stress started to build after I saw that news, she says. Especially as I waited to see if my name would come out and I watched my job possibilities evaporate. Fleischmann later realized that the government wasnt interested in having her testify against Chase in court or any other public forum. Instead, the Justice Departments political wing, led by Holder, appeared to be using her, and her evidence, as a bargaining chip to extract more hush money from Dimon. It worked. Within weeks, Dimon had upped his offer to roughly $9 billion. In late November, the two sides agreed on a settlement deal that covered a variety of misbehaviors, including the fraud that Fleischmann witnessed as well as similar episodes at Washington Mutual and Bear Stearns, two companies that Chase had acquired during the crisis (with federal bailout aid). The newspapers and the Justice Department described the deal as a $13 billion settlement, hailing it as the biggest white-collar regulatory settlement in American history. The deal released Chase from civil liability. And, in what was described by The New York Times as a major victory for the government, it left open the possibility that the Justice Department could pursue a further criminal investigation against the bank. But the idea that Holder had cracked down on Chase was a carefully contrived fiction, one that has survived to this day. For starters, $4 billion of the settlement was largely an accounting falsehood, a chunk of bogus consumer relief added to make the payoff look bigger. What the public never grasped about these consumer--relief deals is that the relief is often not paid by the bank, which mostly just services the loans, but by the banks other victims, i.e., the investors in their bad mortgage securities. Moreover, in this case, a fine-print addendum indicated that this consumer relief would be allowed only if said investors agreed to it – or if it would have been granted anyway under existing arrangements. This often comes down to either forgiving a small portion of a loan or giving homeowners a little extra time to pay up in full. Its not real, says Fleischmann. They structured it so that the homeowners only get relief if they would have gotten it anyway. She pauses. If a loan shark gives you a few extra weeks to pay up, is that consumer relief? The average person had no way of knowing what a terrible deal the Chase settlement was for the country. The terms were even lighter than the slap-on-the-wrist formula that allowed Wall Street banks to neither admit nor deny wrongdoing – the deals that had helped spark the Occupy protests. Yet those notorious deals were like the Nuremberg hangings compared to the regulatory innovation that Holders Justice Department cooked up for Dimon and Co. Instead of a detailed complaint naming names, Chase was allowed to sign a flimsy, 10-and-a-half-page statement of facts that was: (a) so short, a first-year law student could read it in the time it takes to eat a tuna sandwich, and (b) so vague, a halfway intelligent person could read it and not know anyone had done anything wrong. Related Businessman working on computer in office Chase Isnt the Only Bank in Trouble The ink was barely dry on the deal before Chase would have the balls to insinuate its innocence. The firm has not admitted to violations of the law, said CFO Marianne Lake. But the deals most brazen innovation was the way it bypassed the judicial branch. Previously, federal regulators had had bad luck with judges when trying to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart deals worked out between banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real punishments. Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showing the settlement to a judge. The settlement, says Kelleher, was unprecedented in many ways, including being very carefully crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds and prevent public scrutiny of their sweetheart deal. Kelleher asks a rhetorical question: Can you imagine the outcry if [Bush-era Attorney General] Alberto Gonzales had gone into the backroom and given Halliburton immunity in exchange for a billion dollars? The deal was widely considered a good one for both sides, but Chase emerged with barely a scratch. First, the ludicrously nonspecific language surrounding the settlement put you, me and every other American taxpayer on the hook for roughly a quarter of Chases check. Because most of the settlement monies were specifically not called fines or penalties, Chase was allowed to treat some $7 billion of the settlement as a tax write-off. Couple this with the fact that the banks share price soared six percent on news of the settlement, adding more than $12 billion in value to shareholders, and one could argue Chase actually made money from the deal. Whats more, to defray the cost of this and other fines, Chase last year laid off 7,500 lower-level employees. Meanwhile, per-employee compensation for everyone else rose four percent, to $122,653. But no one made out better than Dimon. The board awarded a 74 percent raise to the man who oversaw the biggest regulatory penalty ever, upping his compensation package to about $20 million. Read more: rollingstone/politics/news/the-9-billion-witness-20141106#ixzz3JOO77895 Follow us: @rollingstone on Twitter | RollingStone on Facebook
Posted on: Tue, 18 Nov 2014 04:47:10 +0000
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