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JPMorgan Pays $211M to Settle Bid-Rigging Charges

WASHINGTON (AP) — JPMorgan Chase Co. has agreed to pay $211 million after admitting one of its divisions rigged dozens of bidding competitions to win business from state and local governments.

J.P. Morgan Securities LLC made at least 93 secret deals with companies that handled the bidding processes in 31 states, the Justice Department and Securities and Exchange Commission said Thursday. Those deals allowed the bank to peek at competitors’ offers.

Banks help municipalities invest the money they raise from bond offerings so that they can earn interest before paying for projects. They compete by submitting to state and local governments the best yield they can offer.

The alleged bid-rigging deprived governments of a true competitive process that would produce the best returns on their investments, Assistant Attorney General Christine Varney said in a statement.

JPMorgan’s settlement covers complaints brought by the SEC, the Internal Revenue Service, bank regulators and 25 state attorneys general. Nearly a quarter of the money will go toward settling civil fraud charges brought by the SEC. A large portion will be divided among states, in part to pay restitution to victims of the fraud.

JPMorgan agreed to cooperate with the Justice Department’s investigation in exchange for not being prosecuted, the agency said.

The company admitted and accepted responsibility for the illegal conduct. It blamed it on former employees of a division that has since been shut down. The company said it “is pleased to have resolved this matter with its regulators.” It said the settlement will not affect its financial performance.

It was the second major federal settlement for the bank in the past month. JPMorgan settled civil fraud charges with the SEC in June. It agreed to pay $154 million for allegedly misleading buyers of complex mortgage investments as the housing market collapsed.

One former executive of the bank’s securities unit, James Hertz, pleaded guilty in December to criminal charges related to the bid-rigging issue. He also is cooperating with authorities.

In all, the Justice probe has resulted in criminal charges against 18 former executives of financial services companies and one corporation. Including Hertz, nine of the executives have pleaded guilty.

Here’s how the money from Thursday’s settlement will be divided:

— The SEC will receive $51 million to settle civil fraud charges.

— JPMorgan will pay the IRS $50 million because its actions violated rules governing municipal bonds, which are tax-exempt.

— The bank’s main regulator, the Office of the Comptroller of the Currency, will receive $35 million.

— The settlement with the states is worth $92 million. That includes half of the $35 million JPMorgan agreed to pay the OCC. The settlements have a face value of $228 million because $17 million is counted twice.

JPMorgan’s agreement includes the District of Columbia and these states: Alabama, California, Colorado, Connecticut, Florida, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Tennessee and Wisconsin.

Bank of America and UBS have agreed to settlements based on similar municipal bid-rigging charges brought by federal and state authorities. Bank of America Corp. agreed in December to pay more than $137 million. UBS AG agreed in May to pay more than $160 million.

JPMorgan shares rose 95 cents, or 2 percent, to $41.51 in early-afternoon trading Thursday.

Article source: http://feeds.nytimes.com/click.phdo?i=b7b042bfdde54f17b1988dc64f100096

Media Decoder: Getting a Slice of LimeWire’s Pie

The music industry scored a victory against online piracy last week by winning a $105 million settlement against the file-sharing network LimeWire. But where will that money go? And will any of it end up with the artists whose work was illegally downloaded?

According to the major record labels, which sued LimeWire along with their trade group, the Recording Industry Association of America, some of the LimeWire money — which the service’s creator, Mark Gorton, may have to pay personally — should and will go to artists’ accounts.

“We will share the settlement money with our artists,” the Warner Music Group said in a statement.

But artists’ lawyers and managers say they expect the process for retrieving that money to be difficult, and complain that although hundreds of millions of dollars have been collected through settlements with Napster, Grokster, Kazaa and other file-sharing services, little if any of that money has made its way to artists.

“I don’t remember any of my artists’ accountants ever saying, ‘Hey, guess what, we got a great bonus this month,’ ” Bob Donnelly, a longtime lawyer for artists, said about the previous settlements.

The most likely outcome for LimeWire’s money, according to lawyers and label executives, is that the record companies would divide the settlement according to their market share, and keep a large portion — perhaps half — of whatever remains after paying their considerable legal expenses (the case lasted five years). The remainder would be applied to artists’ accounts, probably according to their share of sales at the label. Artists who have recouped their royalty advances should receive checks.

But lawyers and managers say that it may take considerable effort for artists to recover their share, and some complain that even years after the Napster and Kazaa settlements, they have never been paid. Others suggest that artists with the most power over the labels — and the most powerful representatives — will have an advantage.

“It’s going to be the artists that make noise,” said Dina LaPolt, a lawyer for Steven Tyler, the
Tupac Shakur estate and others. “They are the ones that are going to get paid.”

Article source: http://feeds.nytimes.com/click.phdo?i=b151a2433df760d16c3c013668359477

JPMorgan Pays $211M to Settle Bid-Rigging Charges

Media Decoder: Getting a Slice of LimeWire’s Pie

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