JPMorgan Accused of Breaking Its Duty to Clients

Oh boy, the banks really care about you!
A tale from Louise Story of the NYTimes about JPMorgan:

"In the summer of 2007, as the first tremors of the coming financial crisis were being felt on Wall Street, top executives of JPMorgan Chase were raising red flags about a troubled investment vehicle called Sigma, which was based in London. But the bank chose not to move out $500 million in client assets that it had put into Sigma two months earlier.

Sigma collapsed a year later. Now, new documents unsealed late last month as part of a lawsuit by bank clients against JPMorgan show for the first time just how high the warnings about Sigma went — all the way to the office of the bank’s chief executive, Jamie Dimon. 

While the clients lost nearly all their money, JPMorgan collected nearly $1.9 billion from Sigma’s demise, according to the suit. That’s because as Sigma’s troubles worsened, JPMorgan lent the vehicle billions of dollars and received valuable assets in the form of a security deposit.

After Sigma came undone in September 2008, many of those assets ultimately became JPMorgan’s and eventually appreciated in value, giving the bank a large profit, the suit says...

it sheds new light on one of Wall Street’s oldest problems — whether banks treat their clients’ money with the same care that they treat their own...

One internal e-mail between top executives, for instance, states that the firm needed to protect its own interests in its dealings with Sigma, without taking into account the clients’ position...

JPMorgan made over $470 million in profit within a year of the default by selling off some of the collateral and had recorded a paper gain of $1.2 billion on assets it still held, according to the suit. The bank had also made $228 million in fees from Sigma in exchange for the loans. The total gain was nearly $1.9 billion...

The pension funds... lost nearly all of their investment. The suit said their $500 million became worth 6 cents on the dollar.

Mr. Evangelisti, the JPMorgan spokesman, said the bank disputed the profit figures but he would not say how much the bank believed it made on the Sigma transactions...

http://www.nytimes.com/2011/04/11/business/economy/11bank.html?_r=1&ref=business&pagewanted=all