$700m settles JPMorgan bond case
WASHINGTON - JPMorgan Chase & Co. has agreed to a settlement worth more than $700 million over federal regulators’ charges that it made unlawful payments to friends of public officials to win municipal bond business in Jefferson County, Ala.
The scandal over the county’s $3.9 billion debt has pushed it to the brink of filing what would be the biggest municipal bankruptcy in US history. The Securities and Exchange Commission yesterday outlined the settlement with JPMorgan, which canceled interest-rate swap contracts with the county worth $700 million in March.
The bank did not admit to or deny the allegations. It will pay a $25 million civil fine and make a $50 million payment to the county, and forfeit $647 million in termination fees it claims the county owes from the canceled swap agreements.
Regulators have issued warnings for years over so-called “pay-to-play’’ relationships between investment firms and government officials in the $2.7 trillion municipal bond market, tapped by state and local governments around the country to finance schools, roads, hospitals, and public works projects. The Jefferson County scandal brought the criminal conviction of Birmingham’s former mayor on bribery, tax evasion, and other charges last week.
In a civil suit, the SEC accused two former managing directors of JPMorgan, Charles LeCroy and Douglas MacFaddin, of securities law violations. It’s seeking unspecified restitution. They contest the charges.
New York-based JPMorgan said it has discontinued its municipal swap-exchange business.
In July, the SEC proposed tightening rules governing municipal securities to aid investors.
