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JP Morgan, the largest bank in America, with more than $3 trillion in assets, received glowing plaudits earlier this year for springing into action and working closely with U.S. Treasury Secretary Janet Yellen to head off a major banking crisis.
Yet behind the scenes, JP Morgan Chief Executive Jamie Dimon was battling a far more intractable problem: A $190 million lawsuit filed against the bank by the U.S. Department of Justice in the U.S. Virgin Islands, alleging it profited off the sex-trafficking operation of late predator-financier Jeffrey Epstein.
The lawsuit marks the first time any U.S. state attorney general (in this case, Ariel M. Smith), has spearheaded an enforcement action using the authority of the Trafficking Victims Protection Act. Astoundingly, it also represents the first time such an action has been taken against "a bank for facilitating and profiting from human trafficking," says the USVI Department of Justice.
Facing the inevitability of a trial this month in Manhattan federal court, the bank moved to settle all Epstein-related claims last week, effectively shutting down any lingering questions about exactly what happened and why. This follows a months-long legal ordeal that embroiled a number of executives at the highest levels of the bank, with potential implications for Dimon's succession plans.
The suit, filed late last year, painted a harsh picture of Epstein's alleged financial activities at Wall Street's top bank. "Human trafficking was the principal business of the accounts Epstein maintained at JP Morgan," the USVI attorney general stated.
JP Morgan, in turn, filed documents in court accusing the U.S. Virgin Islands of its own complicity in Epstein's crimes, contending USVI government officials were bought off by the convicted sex offender to look the other way while he marched underage girls in and out of the islands for years, bringing them to his 75-acre private island compound, Little Saint James.
In addition, JP Morgan sued the former boss of its private client bank, James "Jes" Staley, who personally managed the bank's relationship with Epstein, accusing Staley of aiding, abetting and concealing Epstein's sex-trafficking operation in order to keep him as a client.
The bank's suit against Staley also accused him of sexually assaulting a woman in an alleged arrangement with Epstein as part of the bank's bid to hold Staley liable for all financial penalties imposed on JP Morgan due to its Epstein relationship. "In light of Staley's intentional and outrageous conduct in failing to disclose pertinent information and abandoning" the interests of the bank "in favor of his own and Epstein's personal interests," JP Morgan said, it was "entitled to punitive damages."
The bank, which has vehemently denied knowing that Epstein was running a sex-trafficking operation, also demanded Staley return eight years of compensation estimated at around $80 million.
A lawyer for Staley denied the bank's claims, saying, "We wish to make it expressly clear that our client had no involvement in any of the alleged crimes committed by Mr. Epstein." This followed Staley's resignation as chief executive of Barclays in November 2021, after a probe by U.K. regulators found he had regularly visited Epstein's private island and continued correspondences with Epstein after the convicted sex offender went to prison, having plead guilty to soliciting and procuring a child for prostitution in Florida in 2008.
Here's where things get complicated: JP Morgan kept Epstein on as a client from 1998 to 2013 – which means even after his conviction and incarceration in 2008 and becoming a publicly registered sex offender, the bank opted not to cut ties with him.
Staley, who reported to Dimon, left JP Morgan in January of 2013 after catering to Epstein for years and, according to the U.S. Virgin Islands, overseeing the processing of more than $1 billion in payments for Epstein at JP Morgan (yes, that's billion, with a 'B,' which would be a ton of human-trafficking capital, if the USVI attorney general's claims are true).
The situation has been especially problematic for Dimon and one of his top lieutenants, Mary Callahan Erdoes, who succeeded Staley to head JP Morgan's private client bank in 2005, and inherited Epstein as a client.
Named "The Most Powerful Woman in Finance" by American Banker in September, Erdoes has held a seat on JP Morgan's operating committee – longer than anyone else at the bank, other than Dimon, its CEO – and has long been on the bank's shortlist to potentially succeed him.
This past spring, JP Morgan's board made Erdoes the bank's highest-paid executive after the bank's president Daniel Pinto and Dimon himself.
Also this spring, in a deposition related to the bank's Epstein lawsuits, Erdoes said she decided to finally end JP Morgan's relationship with Epstein in the summer of 2013 – not long after Staley left the bank.
According to a leaked transcript, she explained, "Mr. Staley was Mr. Epstein's advocate in the bank and was the senior relationship manager for Mr. Epstein." She added, "Without someone there advocating for Mr. Epstein and the situation that I viewed, I was exiting Mr. Epstein."
In other words, without Staley there to back him up, Erdoes wanted Epstein out. She said he was a "high-risk" client who made unaccountably large cash withdrawals. She'd also tangled with him in the past, according to leaked emails, as Epstein had briefly sued the bank in 2011 for funds he claimed were owed to him by Bear Stearns (where he'd once worked), in the wake of JP Morgan's purchase of the failed bank in 2008.
Aside from filing and settling a lawsuit against JP Morgan – while also its client – Epstein was menacing in other ways, sending the bank vaguely threatening emails that directly acknowledged his blackened reputation, but also seeming to be remorseless about it. In one such correspondence to Erdoes and Staley in August 2011, he wrote, "I am well aware of my current unfortunate rainbow. I am also aware that JPM has a colorful array of clients."
In August 2013, Erdoes visited Epstein personally at his Manhattan mansion to officially end the bank's financial relationship with him.
Yet Epstein continued to enjoy what appeared to be a friendly, informal relationship with the bank, referring powerful, bold-name clients to JP Morgan until just a few months before his arrest and death in prison in August 2019, as he awaited trial on federal sex-trafficking charges.
Among the elite and wealthy Epstein introduced to JP Morgan, according to court filings and the deposition of Staley, were former Microsoft CEO Bill Gates; Google co-founder Sergey Brin; Sultan Ahmed bin Sulayem of Dubai; former U.S. Treasury Department Secretary Larry Summers; and famed television journalist Katie Couric. (Staley testified he met all of the above at Epstein's mansion on New York's Upper East Side.)
As of last week, JP Morgan had settled all known lawsuits in connection with its relationship to Epstein. This included an undisclosed settlement with Staley, a $290 million settlement with sex abuse victims of Epstein, and a $75 million settlement with the U.S. Virgin Islands – less than half of what the USVI attorney general sought amid damning reports that the islands had little defense against their own enabling of Epstein's crimes.
JP Morgan's settlements do not involve any admissions of liability, but reached by Power Corridor, the bank reiterated it "deeply regrets" any association with Epstein and "would never have continued doing business with him if it believed he was using the bank in any way to commit his heinous crimes." It also noted that the majority of funds paid in the settlements will go to help Epstein's victims or charitable organizations.
In particular, $30 million of the USVI settlement will go toward fighting sex crimes, human trafficking and other societal ills, while $25 million will be paid to USVI to "enhance the infrastructure and capabilities of law enforcement to prevent and combat human trafficking and other crimes" in its territories. The balance will cover the USVI's legal fees.
Exactly why JP Morgan continued to tolerate Epstein's overtures throughout the years – other than benefiting from his deep-pocketed networks – is unclear, given the many red flags and fallout it caused.
But with JP Morgan, Staley and the U.S. Virgin Islands all grappling with months of embarrassing disclosures related to their behavior regarding Epstein, it is not surprising these settlements were fast-tracked, with no one admitting any blame – at least not publicly.
