As Bernie Madoff & Co's primary banker, JPMorgan Chase & Co. aided and abetted its client's decades-long fraud, seeking to protect only its own investments even as it suspected that a crime was being perpetrated.  Irving Picard, the Madoff trustee, made these claims in a lawsuit that seeks to recover nearly $6.5 billion in disgorged profits and damages from JPMorgan. 

    "Knew or Should Have Known."   The complaint includes internal e-mails at the bank and details supporting allegations that JPMorgan “knew or should have known” that Bernard L. Madoff Investment Securities LLC, or BLMIS, was likely engaging in fraud, Picard said.  Bernie was arrested in December 2008, and pleaded guilty in March 2009 to charges that his wealth-management business was a massive Ponzi scheme. 

"Incredibly, the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments in BLMIS feeder funds."  -- Deborah Renner, attorney for Picard.

For its efforts, JPMorgan earned at least $500 million in fees and profits from the Madoff relationship. Another Picard attorney, David Sheehan, noted:  "... as the BLMIS banker, JPMC had financial reports in its possession that clearly evidenced fraud.  The same reports led a prominent fund manager to conclude that fraudulent activity was highly likely."

A spokesperson for JPMorgan said the bank will fight the lawsuit.  It was initially filed under seal on 12/2/10 in U.S. Bankruptcy Court in Manhattan.  The amended complaint filed yesterday includes this excerpt from a purported e-mail from a JPMorgan employee in June 2007:  "For whatever it’s worth, I am sitting at lunch with (JPMC employee, name redacted) 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."

    Madoff Liquidation and Adversary Cases.   The liquidiation case is:  [SIPC] v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District New York (Manhattan).   The adversary case is Picard v. JPMorgan Chase & Co., 10-AP-4932, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For further details, go to:   [Bloomberg/BusinessWeek, 2/4, "JPMorgan Accused..."]