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Price fixing, although it resembles the strong-armed business approach one might associate with the criminal underworld, is a white collar crime often perpetrated by company executives.
Just as a few local gangs might get together to agree on who gets to operate in which turf or who might handle the prostitution in a certain area, corporate executives get together in conference calls or at high-powered business powwows and settle secret deals on how pricing for various goods and services might be controlled.
That said, price fixing scams can be so far-reaching into a business sector that they can reach gigantic proportions involving some of the world’s best-known companies and some of the biggest dollar amounts ever associated with crime.
Rolling Stone Magazine recently ran a lengthy article on the Libor fixing scandal that could be the largest crime in terms of dollar losses ever committed. The world’s largest banks in the United States, Europe and Asia, including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland ,have been caught up in that mess. The actual misdeed was bankers reporting false data to British regulators to try to manipulate the London interbank offered rate, which is supposed to be the average rate banks use when they loan money to each other. But some bankers tried to tip the scales their way to enhance specific deals or to make the bank appear healthier than it was, because a better position is appealing to stockholders.
Price fixing is a white collar crime often perpetrated by company executives
The problem is that an estimated six trillion dollars in commercial and consumer loans use the Libor as a benchmark rate. Tips the rate one way or another and it affects millions of consumers around the world.
Price fixing scams are frequently put into action by companies that are not exactly household names. Look for Ford Motor Company and price fixing online, for example, and you will see Ford is suing auto part suppliers for price fixing. That’s because companies like Ford are too much in the public eye to fix prices. If they change the headlight design of a car that becomes headline news, let alone trying to sneak a price-fixing scheme past the public.
Instead companies like Toyo Tire & Rubber Co., a Japanese company with a client list that included Toyota, Subaru and Nissan, was charged with fixing prices of anti-vibration rubber parts. In November 2013, Toyo settled with the U.S. Justice Department, agreeing to pay $120 million to have an investigation against it dropped..
A series of settlements over price fixing involving well-known and lesser-known airlines has been announced in recent years, but here, again, it is the air cargo side of the business — a little less visible to the average consumer — that has included, to date, 23 settlements by companies that colluded to control prices on air shipping services.
In February, the global law firm Hausfeld LLP, announced that Cathay Pacific had agreed to pay $65 million to settle charges of price fixing for its shipping services. That added to an already impressive list of class action victories that involved All Nippon Airways, American Airlines, British Airways, SAS, Cargolux, Lufthansa and 15 others who paid fines of $3.2 million (Malaysia Airlines) to $115 million (Korean Air) to settle charges against them. In total, the conspiracy has resulted in $758 million in fines that largely get dispersed to Hausfeld’s class action clients who were cheated by the collusion.
Price fixing impacts consumers in two ways. First, controlling prices generally results in artificially high prices for goods or services. Secondly, price fixing can box out competing companies, which hurts their business, resulting in fewer jobs.
Regulators have recognized that Libor fixing has the potential to due considerable harm to consumers as a class and have doled out fines that are among the largest ever meted out for corporate malfeasance. By the end of 2013, financial firms had coughed up $2.3 billion to settle charges of rate manipulation, including Deutsche Bank and Société Générale, which paid fines of $633 million and $606 million, respectfully, to settle charges against them.
JPMorgan chairman and chief executive Jamie Dimon will be paid $20 million for the past year’s work.
Jamie Dimon’s pay was cut to $11.5 million in 2012 following huge trading losses. This was half the $23 million he received in 2011.
JPMorgan’s profits fell 16% last year, after costs resulting from legal issues dented the bank’s figures.
For 2013, Jamie Dimon was paid $1.5 million as a basic salary, and an additional $18.5 million in shares, the company said.
Over the past year, JPMorgan has paid around $20 billion to regulators for various violations relating to the US financial crisis.
JPMorgan chairman and chief executive Jamie Dimon will be paid $20 million for the past year’s work
Jamie Dimon’s pay was initially cut after the so called “London Whale” trading loss, in which a single JPMorgan trader wracked up losses of $6 billion.
JPMorgan has also been caught up in another high-profile banking scandal – the manipulation of a key interest rate, the London inter-bank offered rate, or Libor.
It also had to pay fines totaling $2.6 billion to settle government and private claims resulting from its handling of the accounts of the convicted fraudster Bernie Madoff. The bank was accused of not reporting its concerns about Bernard Madoff’s investment scheme.
JPMorgan’s net income fell 7.3% for the fourth quarter of 2013 to $5.3 billion, from $5.7 billion in the final quarter of 2012.
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JPMorgan Chase has reported a 7.3% drop in profit for Q4 2013 after legal costs relating to the fraudster Bernard Madoff dented earnings gains.
Net income fell 7.3% for the fourth quarter to $5.3 billion, from $5.7 billion in the final quarter of 2012.
JPMorgan said one-off items had damaged income after tax by $1.1 billion.
Separately, Wells Fargo, the US’s biggest mortgage lender, said fourth quarter profits rose 11% to $5.4 billion.
JPMorgan was Bernard Madoff’s principal bank and their business relationship dated back to the 1980s
Wells Fargo cut thousands of jobs in the second half of the year in order to boost earnings.
JPMorgan was Bernard Madoff’s principal bank and their business relationship dated back to the 1980s.
Bernard Madoff, 75, is currently serving a 150-year prison sentence in the US after being found guilty of defrauding investors.
Last week, JPMorgan agreed to pay $2.6 billion to settle government and private claims resulting from its handling of Bernard Madoff accounts. The bank was accused of not reporting its concerns about Bernard Madoff’s investment scheme.
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Following a settlement with US prosecutors, JPMorgan Chase has agreed to pay $1.7 billion to victims of the Bernard Madoff fraud.
The settlement comes after Federal prosecutors accused the bank of ignoring red flags about Bernard Madoff’s crimes.
“We recognize we could have done a better job,” said JPMorgan spokesperson Jennifer Zuccarelli.
The bank has agreed to improve its controls as part of the settlement.
While JPMorgan acknowledged failures in its protections against money laundering, the settlement includes a so-called deferred prosecution agreement that allows it to avoid criminal charges.
No individual executives were accused of wrongdoing.
JPMorgan was Bernard Madoff’s primary bank in the later years of a fraud that lasted for decades.
JP Morgan had a relationship with Bernard Madoff dating back to 1986
The bank had a relationship with Bernard Madoff dating back to 1986, according to documents released by the US Attorney’s office.
It ended in 2008 when Bernard Madoff revealed to the FBI that his investment advisory business was a Ponzi scheme.
According to the complaint, Bernard Madoff’s account – account 703 – received deposits and transfers totaling $150 billion over the period from 1986 until the fraud was discovered in 2008, almost exclusively from Madoff Securities.
JPMorgan employees began raising red flags about the account from the late 1990s up until 2008, but no action was taken to alert US regulators.
Bernard Madoff, 75, pleaded guilty to the fraud and is currently serving a 150-year prison sentence in the US.
Over the past year, JPMorgan has paid close to $20 billion in settlements with regulators for various violations relating to the US financial crisis, the so-called “London whale” trading loss, and manipulating the London inter-bank offered rate, or LIBOR.
JPMorgan boss Jaime Dimon has taken a proactive stance in ridding the bank of various investigations into its practices over the past year.
In his annual letter to shareholders from April 2013, Jaime Dimon wrote: “I feel terrible that we let our regulators down.”
The bank is still facing scrutiny from US regulators over its hiring policies in China.
Shares in JPMorgan fell slightly on news of the settlement.
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O.J. Simpson’s South Florida house will be auctioned today (October 29), a Miami-Dade Clerk of Courts official said.
The sale is part of a bank foreclosure proceeding issued by a judge in August for JPMorgan Chase Bank.
The 4,233-square-foot home near Miami has been in foreclosure proceedings for about two years. The home is expected to appear in the online auction Tuesday.
O.J. Simpson was convicted in 2008 in Nevada of the kidnapping and armed robbery of two sports memorabilia dealers in Las Vegas
O.J. Simpson was convicted in 2008 in Nevada of the kidnapping and armed robbery of two sports memorabilia dealers in Las Vegas. He was also acquitted in 1995 of killing his ex-wife and her friend.
Court documents show O.J. Simpson owes more than $796,000 in principal and interest on the Florida property. There’s also nearly $42,000 in unpaid property taxes and insurance premiums of about $43,000.
The property is located on 9450 Southwest 112 Street in Kendall.
JP Morgan has reached a $5.1 billion settlement with the US Federal Housing Finance Agency (FHFA) over charges it misled mortgage giants Fannie Mae and Freddie Mac during the housing boom.
Meanwhile, a separate settlement with the US Justice Department is expected to be announced soon.
“This is a significant step to address outstanding mortgage-related issues,” the FHFA said in a statement.
It is the biggest settlement ever by a US bank.
In a statement, JP Morgan said the settlement resolves the biggest case against the firm relating to mortgage-backed securities.
JP Morgan added that the agreement relates to “approximately $33.8 billion of securities purchased by Fannie Mae and Freddie Mac from JP Morgan, Bear Stearns and Washington Mutual” from 2005 – 2007.
JP Morgan has reached a $5.1 billion settlement with the FHFA over charges it misled mortgage giants Fannie Mae and Freddie Mac during the housing boom
The bank purchased Bear Stearns and Washington Mutual at the height of the financial crisis of 2008-2009, and has tried to argue that it should not be punished for mistakes made before those deals.
As part of the agreement with the FHFA, JP Morgan will pay $4 billion to Fannie Mae and Freddie Mac to settle claims that it violated US securities law.
It will pay the agencies an additional $1.1 billion for misrepresenting the quality of single-family mortgages.
Fannie Mae and Freddie Mac are the biggest mortgage lenders in the US. They received $187 billion in US taxpayer aid to help them stay afloat during the financial collapse.
They have since repaid $146 billion of the loan.
JP Morgan has been under investigation for several months by US regulators.
The bank said that it hoped the settlement would be part of a “broader resolution” of the firm’s housing bubble woes – a nod to an expected settlement with the US Justice Department that is also likely to run to several billions of dollars.
The firm reported a rare loss last quarter, having set aside an additional $9 billion to help it deal with its mounting legal troubles.
JP Morgan has set aside a total of $23 billion to help the bank work through its many investigations by regulators in the US and abroad.
Last month, JP Morgan agreed to pay more than $1 billion to help it end various investigations into its 2012 “London whale” trading debacle, which cost the bank more than $6 billion and raised questions about its oversight procedures.
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JPMorgan Chase has raised its estimate of the value of its recent losses from trading in complex financial derivatives to $4.4 billion.
The US bank said the executives responsible had been dismissed without severance pay and the bank would be clawing back two years of their pay.
When it first announced the loss in May, it said it had lost at least $2 billion.
The bank also said it had found evidence that some traders may have been trying to hide their losses.
The bank said it would restate its results from the previous three months because it had made $459 million less than it thought.
It blamed the restatement on the fact that “certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter”.
JPMorgan Chase has raised its estimate of the value of its recent losses from trading in complex financial derivatives to $4.4 billion
Despite those losses from its chief investment office, the bank reported three-month net profit of $4.96 billion, down 8.7% from the same period last year. JPMorgan’s shares opened up 3% in New York.
Chief executive Jamie Dimon said he had closed the division of the bank responsible for the losses and moved the remainder of the trading position to its investment banking division.
The executive in charge of the closed division, Ina Drew, left the bank in May, days after the losses were announced.
Before Friday’s gains, JPMorgan had lost about 15% of its market value since the losses were first announced.
It also said that it expected another $700 million to $1.7 billion of losses from the derivatives trading.
Responding to questions from analysts following the release of results, Jamie Dimon said: “I think it’s silly for anyone in the business world to think you’re not going to make mistakes.”
“It is not possible in the real world. I just think the mistakes should be smaller, fewer and far between, this being an exception.”
Another bank with rising shares on Friday was Wells Fargo, which was also reporting results.
It posted second-quarter net profits of $4.6 billion, up 17% from the same period last year.
Its profits from mortgages were up to $2.9 billion from $1.6 billion last year.
Wells Fargo is the fourth-biggest US bank and the biggest mortgage lender.
The results came the day after it paid $175 million to settle allegations from the Justice Department that during the housing boom, it had charged higher rates and fees to African-American and Hispanic customers.
Wells Fargo said it had settled to avoid a long legal battle.
JPMorgan Chase, the biggest US bank, has revealed a surprise trading loss of $2 billion on complex investments made by its traders.
Overall, after accounting for other gains, losses at its chief investment office (CIO) are estimated to come in at $800 million in the second quarter.
The loss could be as big as $1 billion, chief executive Jamie Dimon said in an unscheduled conference call.
JPMorgan shares fell 6% after-hours, with other bank stocks following.
JPMorgan Chase has revealed a surprise trading loss of $2 billion on complex investments made by its traders
Goldman Sachs, Citigroup and Bank of America also suffered heavy losses in electronic trading after the market close.
The strategy taken at its CIO had been “riskier, more volatile and less effective” than previously believed, Jamie Dimon said.
“There were many errors, sloppiness and bad judgement. These were egregious mistakes.
“They were self-inflicted and this is not how we want to run a business.”
The CIO is an arm of the bank used to make broad bets to hedge its portfolios of individual holdings. Hedging is an investment practice used to reduce the risk of price fluctuations to the value of an asset.
The trading loss, revealed in a regulatory filing, is expected to hurt JPMorgan’s overall earnings in the quarter, and will come as an embarrassment to the bank.
It had emerged from the 2008 financial crisis in much better health than many of its rivals after avoiding risky investments that had hurt others.
“We will admit it, we will learn from it, we will fix it, and we will move on,” Jamie Dimon said.
He added that the bank was trying to unload the portfolio in question in a “responsible” manner in order to minimize the cost to shareholders.
Jamie Dimon said the type of trading that led to the loss would not be banned by the so-called Volcker rule, designed to censure certain types of trading by banks with their own money.
But he acknowledged that the errors would be particularly embarrassing, given his public criticism of the Volcker rule.
“It plays right into the hands of a bunch of pundits out there, but that’s life,” he said.
Prof. Mark Williams from Boston University, and a former Federal Reserve regulator, said taxpayers should be concerned about these trading losses.
“Taxpayers ultimately have to bail out these <<too big to fail>> banks. And that’s what JPMorgan is – it is too big to fail,” he said.
“How could a bank that’s supposed to be the premier bank in setting the leadership role allow such risk taking?”
