Did JPMorgan Just Open the Door to Potential Prosecution?

When JPMorgan Chase (NYSE: JPM  ) released its fourth-quarter earnings on Wednesday, it also released two internal reports on last year's London Whale trading debacle. Those reports cost CEO Jamie Dimon more than $10 million in compensation,  but will they also end up costing the superbank time, money, and even more of its precious reputation spent defending itself against criminal charges from the Federal Bureau of Investigation?

Just the facts, ma'am
Last October, The New York Times reported that the F.B.I. was listening to tapes turned over to them by JPMorgan to help determine whether criminal charges would be brought against the bank over the London Whale incident. The tapes contained phone conversations in which bank employees "openly discussed how to value the troubled [London Whale] bets in a favorable way."

Other questions the F.B.I. was asking included whether or not "records were falsified to hide the problems from executives in New York." At the time the story broke, four employees from JPMorgan's U.K. office -- where the trades were made -- were reportedly under investigation.

All bad things must come to an end
Since the story broke last October, there's been no further word from the F.B.I. on their London Whale investigation. But unless they've completely abandoned the case, investigators will no doubt be pouring over the just-released JPMorgan reports for any potentially damning evidence.

In my opinion, I don't think there's anything there. Both reports are long and detailed, giving blow-by-blow accounts of how the London Whale incident unfolded and management's response. But their overall tenor and the facts communicated seem more that of a series of blunders and a general laxity of oversight on the part of JPMorgan rather than anything criminal.

Your mileage may vary, and so may the F.B.I.'s, but I don't see these reports adding very much, if anything, to whatever might be brewing at the Hoover Building. In a column on Wednesday, I had written that -- with the release of these two reports, the docking of Dimon's pay, and Dimon's own statement that the unwinding of the London Whale's trades was almost complete -- the Tale of the London Whale may finally be coming to an end. And I still believe that to be the case.

Worst case, if the Bureau does come back at some point with criminal charges, it will likely be limited to the people directly involved in the trades and shouldn't involve the bank on a grand scale. 

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