It's causing quite a stink.
Bloomberg reports that the firm has agreed to forgive $842m of sewer-related debt owed to it by Jefferson County, Alabama, where it took the lead in arranging risky securities deals that pushed the county into the largest U.S. municipal bankruptcy.
That comes on top of a $722m settlement in 2009 with the U.S. Securities and Exchange Commission tied to Jefferson County sewer deals. JPMorgan’s total costs amount to a quarter of the $6.2bn beating it took last year from corporate-credit bets by a trader known as the London Whale. The episode prompted an outcry in Washington and doubts about CEO Jamie Dimon’s reputation as a savvy leader.
If accepted by the court, it would cap a years-long saga in Alabama’s largest county, where JPMorgan once reaped substantial fees arranging deals - tainted by corruption - that turned costly during the credit crisis.
'Everybody thought there was a free lunch and they could all take advantage of it at the same time', said Christopher Taylor, the former executive director of the Municipal Securities Rulemaking Board. 'It burned them all'.
Alabama's lawsuit, first filed in 2009, alleged that fees charged by JPMorgan were 'artificially inflated' in part because of various 'bribes, kickbacks, and pay-offs'.
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image: © Brian Fitzgerald