JPMorgan To Settle With SEC For $153.6M Over Misleading Investors

WASHINGTON/NEW YORK (Sarah N. Lynch and Jonathan Stempel) - JPMorgan Chase & Co said it agreed to pay $153.6 million to settle U.S. Securities and Exchange Commission charges that it misled investors about a mortgage securities transaction just as the nation's housing market was starting to plummet.

The SEC also filed civil charges against Edward Steffelin, a principal at GSC Capital Corp, accusing him of drafting misleading marketing materials for the transaction that failed to reveal that the Magnetar Capital LLC hedge fund helped choose and bet against the underlying securities.

Tuesday's announcement came less than a year after Goldman Sachs Group Inc agreed to pay $550 million to settle SEC charges that it did not tell investors in the Abacus CDO that hedge fund investor John Paulson helped choose the underlying securities and bet against them.

According to the SEC, JPMorgan in 2007 structured a collateralized debt obligation, Squared CDO 2007-1, mainly with credit default swaps tied to other CDO securities whose value was tied to the nation's housing market.

It said the Squared CDO's marketing materials said the underlying investments were chosen by a GSC affiliate. But in fact, Magnetar played a significant role and would benefit from defaults because of a nearly $600 million short position, it said.

In a conference call, SEC enforcement chief Robert Khuzami said he did not anticipate the agency bringing charges against any JPMorgan executives in connection with the CDO case.

JPMorgan did not admit wrongdoing in agreeing to settle. In a statement, it said it also made payments of about $56 million to investors in a separate CDO, Tahoma I.

Alex Lipman, a lawyer for Steffelin, criticized the SEC's actions involving his client.

"We are baffled by the SEC's decision to proceed against an individual in a contested proceeding on a negligence theory, especially in a case where Mr. Steffelin did not work for the underwriter and had no responsibility for the contents of the offering memorandum," Lipman said in an interview.

(Editing by Gerald E. McCormick and John Wallace)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[sfizi]

06:15 PM on 06/22/2011

When will the government take banks and financial institutions scams seriously ?

( are their hands dirty too .. ? )

Crack the sacm roaches them down and put them away for a long time ...

[Pinmason]

05:37 PM on 06/22/2011

I calculate that the SEC and the shadow banks and the mortgage schemes (MBS, MERS, and MIPS) developed to and for the stock market with losses in the trillions of dollars and those losses continue today because of deregulation and lack of enforcement. The stock exchange is nothing more than a two bit gambling casino using others vested interest to make wagers. Wake up America...you have a better chance of making a profit in the fixed Casinos of New Jersey and Las Vegas...and the ship continues to sink as they build the only liferaft for themselves.

[jokerdanny]

04:28 PM on 06/22/2011

hmm, the courts tell us money = speech; and jp morgan paid $153 million but does NOT admit guilt? seems to me they just shouted it

[hornet96]

04:22 PM on 06/22/2011

Can I get my bail out now?

[cwest91556]

01:23 PM on 06/22/2011

It's great to see so many people knowing what is really happening! Dig deeper, learn more! Intel is the best weapon against these Banksters that are intent on ruling the world. Because people are waking up to their schemes and financial rip offs they are scared! MSM is not your friend folks, it's their weapon.

[spqr05]

01:15 PM on 06/22/2011

cont

It amazes me further that the CDO market which put extra pressure on our financial institutions and insurance companies (i.e. a major caused the housing collapse or financial crisis) has not been changed and now that we found fraud within it; we fail to prosecute or punish those willfully and knowingly involved in such actions.

I like China's idea, put them to death; as this has caused all American's great harm and the ones responsible are not punished.

Damn if i steal a grocery i go to jail, if they steal and rob financial companies and the taxpayers they go sleep in their mansions and don't worry about a thing. What a country!!!

[spqr05]

01:14 PM on 06/22/2011

This is exactly why America and the global economy will have a severe financial crisis in the next few years! We need to punish the organizations, businesses, leaders and anyone that knowingly and willfully deceives their investors. Has anyone ever heard of punitive damages? How about a $2 billion dollar fine, you can no longer operate / work in the CDO markets. This is a real quick way to get those defrauding out of business. We don't need you to accept wrongdoing we have just removed your ability and right to operate in that market because you were willfully and knowingly misleading your investors and it's wrong. Don't give them jail but don't let them work in the financial arena again.

Let's see if others agree. I know if someone that robs, rapes or murders others, they get several years in prison if not decades. But when financial companies and people stealing / misleading investors to the tunes of millions and billions of dollars and they don't even get a slap on the wrist. Plus based on their actions do you know how many people lost their homes, savings, livelihood, etc..

We the people need to wake up and realize our leaders and justice department are all in bed together. Justice is no longer blind. Now it makes much more sense that our leaders want to limit our rights to bear arms as they are afraid the American people will soon stand up and reject there mobster like tactics.

[Donatella]

12:57 PM on 06/22/2011

I'll bet that if I rob a bank and get caught I won't be able to just return the money, not admit guilt and walk away.

[1Truthseeker]

12:41 PM on 06/22/2011

To read the latest wikileaks release of US diplomatic cables exposing our diplomates as a corporate sales core. www.alternet.org/story/151370/5_wikileaks_revelations_exposing_the_rapidly_growing_corporatism_dominating_american_diplomacy_abroad?page=1

[1Truthseeker]

12:39 PM on 06/22/2011

This is appalling! A slap in the face to the American tax payers! 154 million for JP Morgan chase is pocket change. They together with the rest of Wall Street imploded our economy and their penalty is 154 million dollars? This is an Injustice of the highest order against the taxpaying working Americans. Another testimonial to corporate ownership of our government. Please take a moment to read the latest wikileaks cable release on what our diplomats are doing for Corporate interest on our tax dollars. The American working taxpayer is financing the global expansion of US corporate power. Our war on terror is nothing more than a corporate world war on anyone who opposes their expansion. We the taxpayers are financing their dirty war and putting our men and women in uniform in harms way to defend corporate interest.

[cats530]

12:32 PM on 06/22/2011

http://mandelman.ml-implode.com/2011/06/bringing-up-the-rear-%e2%80%93-jamie-dimon-chairman-ceo-jpmorgan-chase-co/

[smp276dp]

12:05 PM on 06/22/2011

The SEC should triple the settlement. That is not enough fo those crooks to pay.
And we want some one in jail for the crime also. Money should not be able to pay your
way out of everything.

[trueblue007]

12:00 PM on 06/22/2011

WHEN IS THE REVOLUTION? How much longer are you going to put up with lies and decit??? How long are you going to tolerate taxation without representation?? What exactly will it take for the people to take back this ounce great nation?? When the predator drones are over your house dropping bombs on you? Wounder what it will take to awaken the sleeping masses to the fact that the government is a scam?

[had410]

12:42 PM on 06/22/2011

shouldnt be long. this country is a powder keg waiting for a spark. its sad our polititions are so blinded by greed they cant see this. real patriotic ar'nt they?

[ttimotteo]

11:46 AM on 06/22/2011

I love how they get to admit no wrongdoing in these settlement cases.

[mikeinSeattle]

11:38 AM on 06/22/2011

What is that?! Akin to parking downtown all day and having to pay a $5 ticket. Big deterrent SEC. Way to go.