Madoff: The Final Word by Richard Behar

Author:Richard Behar [Behar, Richard]
Language: eng
Format: epub
Tags: Biography & Autobiography, Business, Criminals & Outlaws, History, United States, 21st Century, Social Science, Sociology, General
ISBN: 9781476726892
Google: bwcOEQAAQBAJ
Amazon: 1476726892
Publisher: Simon and Schuster
Published: 2024-07-09T00:00:00+00:00

9 The Ponzi’s Engine: JPMorgan Chase

Go to your favorite search engine and type in this name: “Gregory Jude Johnson” and the words “JPMorgan Chase.” Next to nothing, right? Well, therein lies a tale.

At the time of the Madoff Ponzi’s collapse in 2008, JPMorgan Chase (JPMC, Chase) was the largest bank in the United States and the sixth-largest in the world by total assets, with $2 trillion. By early 2024, it was the world’s fifth largest, with assets approaching $4 trillion. In terms of market capitalization (the value of a publicly traded company), it’s the world’s top bank by far, at just over $500 billion.

While it was hardly the only giant bank to help Bernie facilitate his Ponzi scheme in various ways, it is impossible to overstate JPMC’s key role in the fraud. As the bank and several of its predecessor institutions, such as Chemical Bank and Chase Manhattan, sat idly by, Bernie ran his Ponzi primarily out of that single Chase checking account ending in 703.

As for Chase’s importance for Bernie to carry out his Ponzi, former prosecutor Lisa Baroni, who was part of a team of federal investigators that dug into Chase’s relationship with Madoff, puts it succinctly: “Bernie without Chase doesn’t exist. If he had a bank that actually paid attention to the ins and outs of the account, then the Ponzi scheme definitely couldn’t have been sustained for so long.” No fewer than a dozen executives at JPMC ignored the red flags about the 703 account that landed in their laps—and there were many. The bank’s role in history’s greatest known fraud should be the subject of a course in the country’s top business schools, but not a single one offers it.

For several years after the Ponzi exploded, JPMC publicly maintained that “all personnel acted in good faith” during the decades of its relationship with Madoff. It wasn’t true. And in 2014 JPMC, in order to avoid pleading guilty to a criminal indictment, admitted to a set of damning facts about its colossal failures, paying $2.6 billion in fines, penalties, and settlements—representing barely .1 percent of its assets, but a penalty nonetheless. Apart from that deal (known as a “deferred prosecution agreement” or DPA), no bank employees were prosecuted. That fact generated some public outrage at the time, particularly because not a single banker anywhere had gone to prison in relation to the overall 2008 fiscal crisis, which was directly traceable to the banking industry.

Tempting as it is, it is difficult to blame prosecutors for the fact that no bankers were held to account for the Madoff scam. While the collective behavior of those at Chase may have been prosecutable—hence the fines—it is difficult to jail a company, an abstraction. And the behavior of any single individual Chase officer or employee did not appear to cross the sometimes too-forgiving bar for criminality.

There was one exception, almost: the aforementioned Gregory Jude Johnson, head of compliance for JPMC’s investment bank in the United States, a title he held there

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