Inaction, according to Madoff trustee Irving Picard's latest filing in federal bankruptcy court.  As early as June 2007, 3 current members of the executive committee at JPMorgan Chase had discussed the possibility that Bernie Madoff was running a Ponzi scheme - as indeed, he was - but they took no action to protect investors or alert regulators.  Those executives are:

• John Hogan, Chief Risk Officer for investment banking.
• Matthew Zames, head of interest rate trading, global forex, public finance, global mortgages, global fixed income.
• Carlos Hernandez, head of global equities at the bank’s investment banking unit.

In Mr. Picard's original lawsuit filing on 12/2/10, names of JPMorgan bank executives had been redacted - i.e., censored or obscured for legal or security purposes.  However, Federal Bankruptcy Judge Burton Lifland earlier this week ruled that the names had to be disclosed, and a new version of the case was filed on Thursday.  Judge Lifland allowed other information to remain private to protect trade secrets
and confidential research.  The unsealing was requested by the NYTimes, WNBC-TV, NBC News and CNBC.

        New Revelations.   The "unredacted" version of the complaint - alleging JPMorgan Chase should have known about the Madoff fraud - adds the names of 23 JPMorgan Chase employees, and Madoff investors Norman Levy and Carl Shapiro.  In addition to Hogan, Zames and Hernandez, mentioned above, the complaint includes Brian Sankey, JPMorgan Chase’s Chief Credit  Officer, and Michael Cembalest, Chief Investment Officer at JPMorgan Global Wealth Management.  Mr. Cembalest's team investigated Bernie Madoff and, "after seeing all of the red flags, chose not to invest" in any of the feeder funds, the complaint noted. 

-- NONE OF THE INDIVIDUALS ARE NAMED AS DEFENDANTS IN THE SUIT. --

A spokesperson for the bank said "JPMorgan complied fully with all applicable laws and regulations in the banking services we provided to Madoff’s firm. ... Madoff’s assertion that his account activity should have alerted us to his fraud is baseless and ignores his repeated and concerted efforts to conceal his fraud."

In any event, here's a sampling of what Mr. Picard's complaint more clearly reveals:

This 'JPM' Dialog.   "For whatever it’s worth, I am sitting at lunch with Matt Zames who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme," John Hogan, the bank’s chief risk officer, according to Picard, is quoted as saying on June 15, 2007, a year and a half before Madoff was arrested.

This 'JPM' Follow-up.   Hogan told the story about his conversation with Zames when JPMorgan Chase’s Hedge Fund Underwriting Committee met to consider a proposal to invest additional money in Madoff feeder funds.

This 'JPM' Statement.    In December 2008, after Madoff had been arrested, Brian Sankey referred to the agenda for the June 2007 Hedge Fund Underwriting Committee meeting, saying: “Perhaps best this never sees the light of day again!!”

Levy's Unusual Transactions.   Norman Levy transferred more than $83 billion in and out of Madoff’s main JPMorgan Chase account from 1998 to 2001.  Mr. Levy, a NY real estate broker was described by Bloomberg news as a “surrogate father” to Madoff, and as “Customer 1” in the original complaint. 

Shapiro's Unusual Transactions.   Picard also identified allegedly irregular transactions by Madoff friend and investor Carl Shapiro, which Picard claims should have served as “red flags” alerting JPMorgan Chase to the fraud.

The case is Picard v. JPMorgan Chase & Co., 10-ap- 4932, U.S. Bankruptcy Court, Southern District of New York.

For further details, go to:   [Bloomberg, 4/14, "Madoff Trustee's Filing Alleges .."]   and  [NYT Dealbook, 4/14, "Bankers Who Doubted .."]