We’re currently representing a charitable foundation that pays JP Morgan Chase Bank a percentage of assets under management to serve as its discretionary portfolio manager. By “discretionary,” we mean that JP Morgan gets to decide what will be bought and sold, without needing prior approval for each transaction. Despite having a fiduciary duty to avoid self-dealing except in instances where it would solely benefit its customer, JP Morgan appears to have larded up the charity’s portfolio with lots of its own products and with products for which it receives added fees. Needless to say, the more this charity is made to pay to JP Morgan and its affiliates in the form of unnecessary fees and pass-through charges, the less money the charity can earn on its investments and the less able it is to serve the public good.
Because JP Morgan has been such a big topic of discussion around here lately, we took particular note of its most recent debacle, now being scrutinized by news sources, financial pundits, and the government. The bank has just announced that it lost $2 BILLION so far this quarter, with way more losses likely on the way. This is its own money it gambled away. Think what it might be doing with yours.
Anyway, in a new “opinion piece,” Investment News describes the situation this way:
Last month, after Bloomberg News broke the story that JPMorgan Chase & Co. (JPM)’s chief investment office had, in essence, become a ticking time bomb, [Jamie] Dimon, the bank’s chief executive officer, called the press coverage “a complete tempest in a teapot.” That explanation no longer works.
Yesterday, Dimon changed tacks. Losses on the investment office’s “synthetic credit portfolio” had reached $2 billion so far this quarter, though he refused to give any meaningful details on how that had happened. Presumably, these are derivatives of some sort, but even that basic fact was too much for the bank to specify.
What Dimon lacked in information, he more than made up for in assigning blame — to himself and JPMorgan employees. “There are many errors, sloppiness and bad judgment,” he said, as JPMorgan’s stock sank in after-hours trading. “These were egregious mistakes. They were self-inflicted.” He called himself and his colleagues “stupid.”
But there is more to it than that. Either Dimon misled the public about the gravity of the festering trades during his company’s first-quarter earnings call last month. Or he didn’t know what was happening inside the bowels of his own company. History tells us the latter is the norm for Wall Street bosses, though it’s hard to say which is worse.
(See the full story here: http://www.investmentnews.com/article/20120511/FREE/120519986 )
The odious character of JP Morgan is so apparent these days that we want to suggest an independent portfolio review to anyone who has an account with it or one of its affiliates and is in an overall loss position. We don’t mean to imply that everyone who loses money in an investment account is entitled to blame the broker or advisor. Even when the investment game is played fair and square, losses can occur. But when JP Morgan’s uber-arrogant denier-in-chief has actually admitted that his firm lost billions of dollars of its own money through “sloppiness,” “bad judgment,” “egregious mistakes,” “self-inflicted wounds,” and the “stupid[ity]” of himself and his colleagues, and when we see with our own eyes how the bank appears to have breached its duties to deal fairly with a charitable foundation’s money, we think it’s better to be safe than sorry. Contact us to discuss a free review of your JP Morgan account, or for that matter, to discuss any concerns you might have with any financial advisor. We never charge a fee to conduct a preliminary evaluation of potential claims.
Hugh Berkson is a Securities Attorney with McCarthy, Lebit, Crystal & Liffman, Co. LPA. Hugh is rated AV® Preeminent™ by Martindale-Hubbell®.
He obtained a business degree in Finance from the University of Texas at Austin in 1989, and is a 1994 graduate of Case Western Reserve University School of Law, where he was a member of the Order of the Barristers and received both the American Jurisprudence Award, (National Mock Trial) in 1993 and the Jonathan M. Ault Mock Trial Prize for 1993-1994.