Canadian whistleblower’s testimony leads to multi-billion dollar settlement
Article by Krysia Collyer and cross posted from globalnews.ca
For more than five years –big U.S. banks have been under scrutiny for their part in the 2007-2008 financial crisis.
JPMorgan Chase & Co. – America’s largest bank- is no different. For its part in the crash – the bank made an agreement with the U.S. Department of Justice to payout $13 billion to atone for misleading investors.
“I was completely caught off guard by the settlement,” says a former JPMorgan employee.
That’s Canadian-born, Alayne Fleischmann. She worked for JPMorgan as a transaction manager. Her job was to review and find the red flags in home loans the bank wanted to purchase from a mortgage lender.
She says what she witnessed during her tenure – helped the Department of Justice in their settlement against JPMorgan.
“These were completely private loans and we have every right to not buy them and we certainly never had to securitize them,” explains Fleischmann.
Alayne is talking about mortgage-backed securities – that’s when banks, including JPMorgan, buy home loans and bundle them together to sell to investors.
Investors were told the securities were high quality. But in fact – that wasn’t quite true.
According to Fleischmann, a number of those mortgages were likely to fail because the homeowner couldn’t afford to make the payments.
But the bank never told this to investors.
“It got to the point where the quality of the loans got so bad that I think anyone could look at them and realize these people weren’t going to be able to pay back their loans,” says Fleischmann.
Fleischmann says she tried to warn her bosses about the bad loans but her concerns fell on deaf ears.
“I warned an executive director and a managing director that they couldn’t securitize these loans. I was still worried after that they would do it. So a couple of weeks later I submitted a written memo which outlined general issues I was seeing,” Fleischmann says.
A little more than a year after she wrote that memo – Fleischmann was laid off along with others at JPMorgan.
”JPMorgan was one of those big players that was very much involved in these kinds of bad loans,” explains William Black, an associate professor of economics and law at the University of Missouri in Kansas City.
Black is no stranger to prosecuting Wall Street – he used to work for the U.S. Federal Government as a financial regulator.
He says whistleblowers often face huge repercussions for speaking out.
“There’s the Fleischmann’s of the world who are competent professionals who are taught you’re supposed to protect the bank from loss, and they’re going ‘this is crazy, no bank would buy this, what are we doing?’,” explains Black. “And that’s the problem because that threatens the gravy train.”
Out of work – Fleischmann moved back to Canada.
Then in 2012 – she got a call from an Assistant U.S. Attorney with the Department of Justice. They found her memo and wanted her to testify. So she did.
“They had all the emails and the reports and the notifications and my memo,” Fleischmann says.
But instead of bringing criminal charges against JPMorgan – the Department of Justice cut a deal with the bank.
“What Ms. Fleischmann was to deliver on a platinum platter, a criminal case, against the senior managers of JPMorgan,” explains Black, “of course that didn’t happen.”
Black says it’s easy to get CEOs to agree to huge fines in an organization because they don’t have to pay out of their own pocket.
“Here’s what the CEO cares about. #1: I don’t go to prison. #2: I don’t lose my job. #3: I don’t have to pay back my bonuses,” Black says.
16×9 reached out to Jamie Dimon – the CEO of JPMorgan Chase & Co. – to ask about the settlement agreement and Alayne’s allegations. We were told he wasn’t available to do an interview.
But JPMorgan did admit, in the settlement agreement with the Department of Justice, it failed to disclose to investors that some of these investments did not meet their own policies.
I am pleased that a Canadian stood up for what is ethically right; however, when the rest of the world wants to remain blind, it remains blind. Jamie Dimon should be in jail paying for his multitude of sins but instead he gets a tap on the wrist and the game continues on until the next big crisis.
The government corruption is worse than the bank corruption. Banks can only take your money.
Since it is well documented that the banksters own the government, and since that will be settled officially in the union hall as Trumpke at AFL-CIO is suing the banksters to give up how much the pay their boys to go over to the Treasury, Justice, etc., so that they both own and control the gov’t, your point is pointless.
Open Secret, by Erin Arvedlund
Moral hazard only exists for the non-rich.
Less than a tap on the wrist – TooBigToFail got the ZIRP gravy train bilking billions from the public trough giving banksters big bonuses who smirk back with “TooBigToJail”
Lawyer Rocco Galati is prosecuting the Bank of Canada on the grounds it has abdicated its statutory and constitutional duties by refusing to make interest free loans to the Provinces and to municipalities to fund infrastructure and other social needs. Provinces and cities therefore have no alternative but to pay market interest to private financial institutions who in turn borrow at low interest from the Bank of Canada. The Bank of Canada chooses to support the profitability of banks ahead of the public welfare. Let us hope this judicial matter ends with a blow to defenders of the status quo and a victory for the little people.
Report of an Appeal of an August 2013 Interim Order
in the Lawsuit Respecting the Bank of Canada
> that the defendants’(officials) are wittingly and/or unwittingly, in varying degrees, knowledge, and intent, engaged in a conspiracy, along with the Bank for International Settlements, the Financial Stability Board, and International Monetary Fund to render impotent the Bank of Canada Act, as well as Canadian sovereignty over financial, monetary, and socio-economic policy, and in fact by pass the sovereign rule of Canada, through its Parliament, by means of banking and financial systems…causing injury to Canadians.…
Modern Monetary Theory in Canada
“The government corruption is worse”? Is that so? And what if the banks are the actual government behind the government?
Yeah! Right on! Banks only illegally ruin your life stealing retirement income, taking your house, selling bunk bonds to your ‘sophisticated’ local municipality, effectively foreclosing on your future. That IS nothing compared to the Guv’ment! The Guv’ment can take away your right to bear arms!
“To atone for misleading investors”…
“That wasn’t quite true”…
“Failed to disclose”…
“Did not meeet their own policies”…
What wimpy language. Why not use what Bill Black refers to as the “F” word: FRAUD.