The trustee cleaning up the Madoff mess has sued JP Morgan Chase, with the WSJ describing the suit as follows:
“The suit alleges J.P. Morgan was “basically creating products to leverage off of this relationship with Madoff,” Tavakoli said. “Instead then of asking questions, terminating the relationship or talking with the [Securities and Exchange Commission], they decide to create products based on something that they have a series of red flags on.”
The suit alleges the bank did a “cost-benefit analysis,” realizing the fraud would need to top $3 billion to hurt J.P. Morgan. That allegation might evoke such public relations disasters as Ford Motor Co.’s (F) Pinto trouble in the 1970s.”
Another source with information on the suit states:
“Mr Picard alleges that JPMorgan ignored billions of dollars in suspicious transfers in Mr Madoff’s bank business account and repeatedly failed to follow up on concerns raised by employees involved in Madoff structured products.”
The timing of Madoff’s arrest in December 2008 and the close relationship of JPM chief Jamie Dimon with the Obama administration is curious.
Back in July 2010 the WSJ reported that JP Morgan:
“won a dismissal of a lawsuit accusing the bank of helping convicted fraud figure Bernard Madoff prolong his multibillion-dollar Ponzi scheme. A federal judge ruled…that a lawsuit filed by a former Madoff investor, MLSMK Investments Co, failed to show the bank had knowledge of Mr. Madoff’s fraud or had a motive to perpetuate it.”
Now trustee Picard is essentially contradicting this ruling; although the trustee doubtless has had greater access to evidence than the plaintiffs in the previous action.