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U.S. attorney opening criminal probe into J.P. Morgan’s dealings

Benjamin Wagner says the company violated securities laws between 2005 and 2007

J.P. Morgan Chase Co. may have reached a $13 billion settlement with the federal government concerning the bank’s role in the 2008 mortgage crisis, but one small detail in the agreement should have J.P. Morgan executives worried. The bank wished to insert a nonprosecution agreement, but U.S. Attorney General Eric Holder refused.

Now, it’s not just the civil settlement that J.P. Morgan has to worry about. Benjamin Wagner, the U.S. attorney for the Eastern District of California, is set to lead a criminal probe into J.P. Morgan’s activities. Activities that helped damage the U.S. housing market.

In August, J.P. Morgan disclosed in a regulatory filing that Wagner’s office had preliminarily determined that the bank violated securities laws in its dealings between 2005 and 2007. Two of his deputies gathered information under the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA) in order to present its preliminary case.

Wagner himself, along with other prominent figures including Holder, later met with J.P. Morgan CEO Jamie Dimon in an attempt to end any criminal action through having the bank plead guilty to making false statements related to sales of toxic mortgage bonds.

However, the bank refused to plead guilty, and now Wagner’s office will head up a national investigation into J.P. Morgan’s dealings. “Going forward, we will have very substantial discretion in how we handle the investigation, and we will go where the evidence takes us,” Wagner told Bloomberg. “I will be consulting closely, of course, with my colleagues in D.C.”

J.P. Morgan has agreed to cooperate with the criminal investigation from Wagner’s office. After setting aside an additional $9 billion for legal costs and posting third-quarter losses, the bank may wish to put all litigation related to the 2008 mortgage crisis in its rear-view mirror as quickly as possible.


For more on J.P. Morgan’s cornucopia of recent legal troubles, check out these InsideCounsel stories:

J.P. Morgan closing in on agreement with DOJ over mortgage probes

J.P. Morgan posts third quarter losses

Legal costs blast J.P. Morgan’s bottom line

Witness steps forward in J.P. Morgan mortgage securities investigation

SEC displaying aggressive new stance designed to scare off violators

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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