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JPMorgan may release London 'Whale' report

Bloomberg  |  New York 

JPMorgan Chase & Co’s board will consider releasing an internal report this week that faults Chief Executive Officer Jamie Dimon’s oversight of a division that lost more than $6.2 billion on botched trades, according to two people with direct knowledge of the matter.

The final report, which builds on a preliminary analysis released in July, is critical of Dimon, 56, former Chief Financial Officer Doug Braunstein, 51, former Chief Investment Officer Ina Drew and others for inadequately supervising traders in a UK unit that built up a large and illiquid position in credit derivatives last year, these people said.

The report, which isn’t yet finished, will be presented to the board when it meets on Tuesday. The directors will then vote on whether to release it to the public when the bank announces fourth-quarter earnings the following day, the people said, asking not to be named because the report is not yet public.

Joe Evangelisti, a spokesman for the New York-based bank, declined to comment and said that each member of the board also declined to comment.

UK regulatory authorities have asked the bank to keep its findings private until they can ensure it adheres to European privacy laws that protect individuals, one of the people said. The report describes executives at JPMorgan and their role in the loss.

The bank’s analysis in July said that London traders may have intentionally mismarked some of their positions and sought to hide the full amount of their losses.

Bruno Iksil, the UK trader nicknamed the London Whale because his trading book was so large, made a wrong-way bet on credit derivatives that led to the company’s single biggest trading loss. At one point, as much as $51 billion in shareholder value was wiped out.

The bank has come under increasing scrutiny and regulatory oversight in the aftermath of the US housing crisis. The trading debacle is under investigation by the US Justice Department, Federal Bureau of Investigation and the Securities and Exchange Commission, among other agencies.

The Office of the Comptroller of the Currency may sanction the bank as early as Monday for lax anti-money laundering controls, according to a person familiar with that probe.

Separately, JPMorgan agreed in a deal announced Januay 7 to pay $2 billion, on top of $5.29 billion assessed against the bank last year, to settle mortgage abuse charges by the Federal Reserve and OCC.

Non-bank enforcement officials also are clamping down on the largest US bank. Last month, a Milan judge convicted JPMorgan and three other banks of fraud in selling the city derivatives, a decision that all four banks plan to appeal.

The Wall Street Journal reported on its website yesterday that findings had been reached after a review of the UK unit's trades and that Dimon’s bonus will be cut. The company announced plans to conduct an internal review when it initially disclosed problems with the trade in May. Dimon said in July that the board would take the loss into consideration when setting his compensation for 2012.


First Published: Mon, January 14 2013. 00:44 IST