[ by Howard Haykin ]

Treasury Inspector General Eric Thorson has threatened JPMorgan Chase & Co. with sanctions for failing to turn over documents to regulators investigating the bank’s ties to Bernie Madoff’s Ponzi scheme.  The letter, dated 12/21/12, was sent to Stephen Cutler, JPMorgan Chase & Co.'s General Counsel.  The OCC, the Treasury's independent watchdog unit, is working with U.S. regulators in connection with this probe.  The letter did not identify the documents requested or details into the investigation.

JPMorgan has repeatedly argued it does not have to turn over certain kinds of documents to the OCC because it would impinge on its attorney-client privilege rights.  In response to that position, Inspector General Thorson reiterated that the OCC has been unable to get documents it requested, and noted the following:  "The OCC could not do its work and carry out its authority under its examination statute...if that statute was interpreted or operated to bar access to bank records for which a claim of privilege was made."

Inspector General Thorson gave JPMorgan a 1/11/13 deadline for a response as to how the bank intends to cooperate with the OCC probe or risk sanctions for impeding the agency’s oversight. 

requesting that the bank comply with document requests related to a government probe into JPMorgan's relationship with convicted Ponzi scheme Bernie Madoff.  In the letter dated 12/21/12, Mr. Thorton told the bank his office would not accept the argument that JPMorgan does not have to turn over certain kinds of documents to the Office of the Comptroller of the Currency.  JPMorgan was given until 1/11/13 to respond as to how it would resolve the dispute.

JPMorgan Comment.   A bank spokesperson said:  "This dispute does not go to the merits of the matter.  But it does raise an important issue of principle: whether we and other banks - large and small alike - have the fundamental right, long recognized in this country, to communicate freely with and seek confidential guidance from their lawyers."   The bank has said in the past there was no showing that anyone there knew of Madoff's elaborate scheme.

Madoff Trustee Irving Picard.   Picard has accused JPMorgan of ignoring warning signs that Madoff's business was a fraud and has attempted to sue the bank.   However, a judge ruled that the trustee lacked power to bring claims against the bank for harm to former Madoff customers, and tossed out all but $425 million of Picard's $19.9 billion lawsuit against JPMorgan.  Mr. Picard is in the process of appealing the ruling.

For further details, go to:   [Bloomberg, 1/4/13] and [Reuters, 1/4/13].