NYT: “JPMorganChase and federal authorities are nearing settlements over the bank’s ties to Bernard L. Madoff, striking tentative deals that would involve roughly $2 billion in penalties and a rare criminal action. The government will use a sizable portion of the money to compensate Mr. Madoff’s victims.” “The settlements, which are coming together on the anniversary of Mr. Madoff’s arrest at his Manhattan penthouse five years ago on Wednesday, would fault the bank for turning a blind eye to his huge Ponzi scheme, according to people briefed on the case who were not authorized to speak publicly.
A settlement with federal prosecutors in Manhattan, the people said, would include a so-called deferred-prosecution agreement and more than $1 billion in penalties to resolve the criminal case. The rest of the fines would be imposed by Washington regulators investigating broader gaps in the bank’s money-laundering safeguards.
The agreement to defer prosecution would also list the bank’s criminal violations in a court filing but stop short of an indictment as long as JPMorgan pays the penalties and acknowledges the facts of the government’s case. In the negotiations, the prosecutors discussed the idea of extracting a guilty plea from JPMorgan, the people said, but ultimately chose the steep fine and deferred-prosecution agreement, which could come by the end of the year.
Until now, no big Wall Street bank has ever been subjected to such an agreement, which is typically deployed only when misconduct is severe. JPMorgan, the authorities suspect, continued to serve as Mr. Madoff’s primary bank even as questions mounted about his operation, with one bank executive acknowledging before the arrest that Mr. Madoff’s “Oz-like signals” were “too difficult to ignore,” according to a private lawsuit.
….The government has been reluctant to bring criminal charges against large corporations, fearing that such an action could imperil a company and throw innocent employees out of work. Those fears trace to the indictment of Enron’s accounting firm, Arthur Andersen, which went out of businesses after its 2002 conviction, taking 28,000 jobs with it. Ever since, prosecutors have increasingly relied on deferred-prosecution agreements, which rebuke companies without threatening their health. Although a Wall Street bank has never faced a deferred-prosecution agreement, according to a University of Virginia Law School database, Wachovia and the banking arm of American Express have entered into such deals.
The agreements, however, have fueled concern that some banks, having grown so large and interconnected, are too big to indict.”
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