Image
Last week the business press reported that the U.S. Department of Justice may assert charges against JPMorgan Chase for its role in perpetuating the Bernard Madoff Ponzi scheme which defrauded investors out of $17 billion in actual funds and $64 billion in paper losses based on the falsified values shown on client statements. Unnamed sources said the Justice Department may agree to a deferred prosecution agreement in exchange for an outside monitor or, in the alternative, charge JPMorgan's banking division with violations of the Bank Secrecy Act for failing to report its Madoff suspicions to Federal authorities. Interestingly, JPMorgan did report its suspicions to a government regulator - in the United Kingdom, not in the U.S.

Such a development would also raise serious new questions about how the Board of Trustees of NYU handles conflicts of interest. The Board is already under withering criticism from a group of 400 faculty members. In July, the faculty group issued a letter demanding that Martin Lipton, Chairman of the Board for the past 15 consecutive years, step down over a raft of conflicted actions which came to a head when Ariel Kaminer of the New York Times reported in June in a front page article that NYU, a taxpayer subsidized nonprofit, was doling out forgivable mortgage loans on vacation homes to an elite group of faculty and administrators.

Lipton is a founding partner of the Wall Street law firm, Wachtell Lipton Rosen & Katz, which served as legal counsel to JPMorgan to fight a lawsuit brought by the Madoff Trustee assigned to secure funds for defrauded investors. This was at a time when both Lipton and top executives of JPMorgan served on the Board of NYU units that had themselves been defrauded and could have benefited from monetary clawbacks from JPMorgan.

Read the rest of the article here