JP Morgan Chase 2015 Annual Report Download - page 313

JPMorgan Chase & Co./2015 Annual Report 303
been stayed pending a decision on JPMorgan Chase’s
motion to dismiss the plaintiffs’ remaining claim.
JPMorgan Chase has also filed complaints in the United
States District Court for the District of Columbia against the
FDIC, in its corporate capacity as well as in its capacity as
receiver for Washington Mutual Bank, asserting multiple
claims for indemnification under the terms of the Purchase
& Assumption Agreement between JPMorgan Chase and the
FDIC relating to JPMorgan Chase’s purchase of most of the
assets and certain liabilities of Washington Mutual Bank.
Wendel. Since 2012, the French criminal authorities have
been investigating a series of transactions entered into by
senior managers of Wendel Investissement (“Wendel”)
during the period from 2004 through 2007 to restructure
their shareholdings in Wendel. JPMorgan Chase Bank, N.A.,
Paris branch provided financing for the transactions to a
number of managers of Wendel in 2007. In April 2015,
JPMorgan Chase Bank, N.A. was notified that the authorities
were formally investigating the role of its Paris branch in
the transactions, including alleged criminal tax abuse.
JPMorgan Chase is responding to and cooperating with the
investigation. In addition, civil proceedings have been
commenced against JPMorgan Chase Bank, N.A. by a
number of the managers. The claims are separate, involve
different allegations and are at various stages of
proceedings.
* * *
In addition to the various legal proceedings discussed
above, JPMorgan Chase and its subsidiaries are named as
defendants or are otherwise involved in a substantial
number of other legal proceedings and inquiries. The Firm
believes it has meritorious defenses to the claims asserted
against it in its currently outstanding legal proceedings and
inquiries, and it intends to defend itself vigorously in all
such matters. Additional legal proceedings and inquiries
may be initiated from time to time in the future.
The Firm has established reserves for several hundred of its
currently outstanding legal proceedings. In accordance with
the provisions of U.S. GAAP for contingencies, the Firm
accrues for a litigation-related liability when it is probable
that such a liability has been incurred and the amount of
the loss can be reasonably estimated. The Firm evaluates its
outstanding legal proceedings each quarter to assess its
litigation reserves, and makes adjustments in such reserves,
upwards or downward, as appropriate, based on
management’s best judgment after consultation with
counsel. During the years ended December 31, 2015, 2014
and 2013, the Firm incurred legal expense of $3.0 billion,
$2.9 billion and $11.1 billion, respectively. There is no
assurance that the Firm’s litigation reserves will not need to
be adjusted in the future.
In view of the inherent difficulty of predicting the outcome
of legal proceedings, particularly where the claimants seek
very large or indeterminate damages, or where the matters
present novel legal theories, involve a large number of
parties or are in early stages of discovery, the Firm cannot
state with confidence what will be the eventual outcomes of
the currently pending matters, the timing of their ultimate
resolution or the eventual losses, fines, penalties or impact
related to those matters. JPMorgan Chase believes, based
upon its current knowledge, after consultation with counsel
and after taking into account its current litigation reserves,
that the legal proceedings currently pending against it
should not have a material adverse effect on the Firm’s
consolidated financial condition. The Firm notes, however,
that in light of the uncertainties involved in such
proceedings, there is no assurance the ultimate resolution
of these matters will not significantly exceed the reserves it
has currently accrued; as a result, the outcome of a
particular matter may be material to JPMorgan Chase’s
operating results for a particular period, depending on,
among other factors, the size of the loss or liability imposed
and the level of JPMorgan Chase’s income for that period.