JP Morgan Chase 2013 Annual Report Download - page 325

JPMorgan Chase & Co./2013 Annual Report 331
The Firm has entered into agreements with a number of
entities that purchased MBS that toll applicable limitations
periods with respect to their claims, and has settled, and in
the future may settle, tolled claims. There is no assurance
that the Firm will not be named as a defendant in additional
MBS-related litigation.
Mortgage-Related Investigations and Litigation. The Attorney
General of Massachusetts filed an action against the Firm,
other servicers and a mortgage recording company,
asserting claims for various alleged wrongdoings relating to
mortgage assignments and use of the industry’s electronic
mortgage registry. The court granted in part and denied in
part the defendants’ motion to dismiss the action, which
remains pending.
The Firm is named as a defendant in a purported class
action lawsuit relating to its mortgage foreclosure
procedures. The plaintiffs have moved for class
certification.
Two shareholder derivative actions have been filed in New
York Supreme Court against the Firm’s Board of Directors
alleging that the Board failed to exercise adequate
oversight as to wrongful conduct by the Firm regarding
mortgage servicing. These actions seek declaratory relief
and damages. In October 2012, the Court consolidated the
actions and stayed all proceedings pending the plaintiffs’
decision whether to file a consolidated complaint after the
Firm completes its response to a demand submitted by one
of the plaintiffs under Section 220 of the Delaware General
Corporation Law.
In February 2014, the Firm entered into a settlement with
the United States Attorney’s Office for the Southern District
of New York, the Federal Housing Administration (“FHA”),
the United States Department of Housing and Urban
Development (“HUD”) and the United States Department of
Veterans Affairs (“VA”) resolving claims relating to the
Firm’s participation in federal mortgage insurance
programs overseen by FHA, HUD and VA. Under the
settlement, JPMorgan Chase will pay $614 million and
agree to enhance its quality control program for loans that
are submitted in the future to FHA’s Direct Endorsement
Lender program. This settlement releases the Firm from
False Claims Act, FIRREA and other civil and administrative
liability for FHA and VA insurance claims that have been
paid to JPMorgan Chase since 2002 through the date of the
settlement.
The Civil Division of the United States Attorney’s Office for
the Southern District of New York is conducting an
investigation concerning the Firm’s compliance with the Fair
Housing Act (“FHA”) and Equal Credit Opportunity Act
(“ECOA”) in connection with its mortgage lending
practices. In addition, two municipalities are pursuing
investigations into the impact, if any, of alleged violations of
the FHA and ECOA on their respective communities. The
Firm is cooperating in these investigations.
Municipal Derivatives Litigation. Several civil actions were
commenced in New York and Alabama courts against the
Firm relating to certain Jefferson County, Alabama (the
“County”) warrant underwritings and swap transactions.
The claims in the civil actions generally alleged that the
Firm made payments to certain third parties in exchange for
being chosen to underwrite more than $3 billion in
warrants issued by the County and to act as the
counterparty for certain swaps executed by the County. The
County filed for bankruptcy in November 2011. In June
2013, the County filed a Chapter 9 Plan of Adjustment, as
amended (the “Plan of Adjustment”), which provided that
all the above-described actions against the Firm would be
released and dismissed with prejudice. In November 2013,
the Bankruptcy Court confirmed the Plan of Adjustment,
and in December 2013, certain sewer rate payers filed an
appeal challenging the confirmation of the Plan of
Adjustment. All conditions to the Plan of Adjustment’s
effectiveness, including the dismissal of the actions against
the Firm, were satisfied or waived and the transactions
contemplated by the Plan of Adjustment occurred in
December 2013. Accordingly, all the above-described
actions against the Firm have been dismissed pursuant to
the terms of the Plan of Adjustment. The appeal of the
Bankruptcy Court’s order confirming the Plan of Adjustment
remains pending.
Petters Bankruptcy and Related Matters. JPMorgan Chase
and certain of its affiliates, including One Equity Partners
(“OEP”), have been named as defendants in several actions
filed in connection with the receivership and bankruptcy
proceedings pertaining to Thomas J. Petters and certain
affiliated entities (collectively, “Petters”) and the Polaroid
Corporation. The principal actions against JPMorgan Chase
and its affiliates have been brought by a court-appointed
receiver for Petters and the trustees in bankruptcy
proceedings for three Petters entities. These actions
generally seek to avoid certain purported transfers in
connection with (i) the 2005 acquisition by Petters of
Polaroid, which at the time was majority-owned by OEP; (ii)
two credit facilities that JPMorgan Chase and other financial
institutions entered into with Polaroid; and (iii) a credit line
and investment accounts held by Petters. The actions
collectively seek recovery of approximately $450 million.
Defendants have moved to dismiss the complaints in the
actions filed by the Petters bankruptcy trustees.
Power Matters. The United States Attorney’s Office for the
Southern District of New York is investigating matters
relating to the bidding activities that were the subject of the
July 2013 settlement between J.P. Morgan Ventures Energy
Corp. and the Federal Energy Regulatory Commission. The
Firm is cooperating with the investigation.
Referral Hiring Practices Investigations. The SEC and DOJ are
investigating, among other things, the Firm’s compliance
with the Foreign Corrupt Practices Act and other laws with
respect to the Firm’s hiring practices related to candidates
referred by clients, potential clients and government
officials, and its engagement of consultants in the Asia
Pacific region. The Firm is cooperating with these
investigations. Separate inquiries on these or similar topics
have been made by other authorities, including authorities
in other jurisdictions, and the Firm is responding to those
inquiries.