On the day Bernie Madoff was arrested and confessed to orchestrating one of the largest investment swindles in history, Helen Davis Chaitman clung to a grandchild, and wondered how she’d take care of herself, her family—and the 175 rescue dogs, horses, donkeys, chickens and goats she keeps on a farm in New Jersey.
“This will turn out to be a positive thing in your life,” her friend, the economist and financial analyst Satyajit Bose, told Chaitman.
“He was so right,” Chaitman, 74, says now. “It enriched my life in so many ways.” The proof is her salacious and fact-filled commentary website, JPMadoff.com, which lampoons the former investment manager, and the bank where his firm once deposited investors’ funds: J.P. Morgan Chase. Her venture turns one, this month.
As a lawyer, Chaitman helped write—and enforce—the legal duties bank lenders owe to their customers. But as a twice-divorced, single woman who invested her life savings with Madoff, she thought her own options were limited.
JPMadoff is her revenge.
The site features a headshot of Madoff with his signature, swept-back gray hair and dark trench coat against the octagon logo of J.P. Morgan Chase.
“Stop Big Bank Bandits. Take Action Now,” is the JPMadoff site’s rallying cry. It promotes a consumer boycott of the United States’ largest commercial bank.
While Madoff slowly works off his 150-year prison sentence for fraud, J.P. Morgan’s
earnings are beginning to emerge from the staggering weight of more than $32 billion in litigation-related expense over the last 5-1/2 years, arising from an astounding array of misdeeds. Of the five largest banks in the United States, only Bank of America
has paid more: $34.9 billion, financial filings show.
Chaitman and JPMadoff are reminders for all of us to remain vigilant against the bad behavior synonymous with economic good times, and revealed in bad ones.
As outlined in the Justice Department’s deferred prosecution agreement with J.P. Morgan in January 2014, the bank agreed—among other things—that it had accepted about $150 billion in Madoff deposits and transfers over the course of three decades, most of that investor monies. The bank welcomed the business until autumn 2008, when the financial markets crisis—and bankers’ doubts about Madoff—prompted the bank to rapidly wind down all but a fraction of its related investments, before he was arrested that December.
By then, only about $300 million was left of the $65 billion fund.
Meanwhile, by reversing its Madoff-related stakes while omitting to report its suspicions about him to U.S. regulators (until after he was arrested), J.P. Morgan reduced what would have been about a $250 million loss to $40 million, according to the statement of facts in the deferred prosecution agreement.
The bank did file a suspicious activity report about Madoff in October 2008 to the United Kingdom’s Serious Organised Crime Agency. But such information was unavailable to U.S. investigators, much less to defenseless investors.
While little might be gained from rehashing old news, Chaitman continues to add J.P. Morgan-related news and commentary to her site.
“We do not know how many chapters it will take because the story keeps unfolding,” Chaitman and her partner, the litigator Lance Gotthoffer, state.
They are now shopping the story to publishers, as a book they subtitle: “The Unholy Alliance between America’s biggest bank and America’s biggest crook.”
I asked Chaitman if she’d heard any objections about the website from J.P. Morgan or its lawyers. She said no. I heard about it from a J.P. Morgan employee, so at least some people there must be reading her work. Examples:
•“The Deferred Prosecution of JPMorgan: White-Wash of the Century”
•“What the folks at JPMC Knew and When they Knew It”
•“The Differences Between the Gambino Crime Family and JPMorgan Chase” (this features a mug shot of crime boss Carlo Gambino, and what apparently is a mockup of CEO Jamie Dimon posing for his)
•“When Jamie Dimon Screws Up, He Does a Whale of a Job”
•“Hallelujah: Jamie Dimon’s Been Born Again—or Has He?”
The latest installment had me laughing aloud. As bitter as Chaitman’s personal experience was—“I’d put all my liquid assets with Madoff,” she told me, very seriously—she and Gotthoffer have a wicked sense of humor.
“We thought we had something to cheer about last month,” they wrote recently. “We saw a headline that read:
Jamie Dimon said that leaving J.P. Morgan is the ‘best thing’ he can do for his country and humanity in an interview with Fox Business Network’s Maria Bartiromo.
“ ‘A-men,’ ” we said. After observing a moment of silence, we looked again and saw that the headline said, ‘Jamie Dimon said that leading J.P. Morgan is the best thing he can do for his country and humanity.’ ”
J.P. Morgan Chase, by the way, offered no comment, no rebuttal, and especially no humor, in response to my invitation to respond.
The JPMadoff authors skewer Dimon: “Note that he didn’t say leading J.P. Morgan Chase is the best thing he can do for J.P. Morgan Chase. He said it’s the best thing he can do for ‘his country and humanity.’”
And they note: “Dimon bragged to Bartiromo that the bank helps veterans, charities and consumers. We aren’t sure if Dimon was referring to the billions of dollars the bank has paid out in the last four years to satisfy claims that it defrauded veterans, charities, and consumers; or to something else.”
I reviewed a dozen years worth of J.P. Morgan annual reports to add up the score myself. It confirmed my suspicion that bank fines are a lagging indicator of economic booms that only marginally register the misery of busts.
After the dot-com flameout in 2000—and the recession that ensued—J.P. Morgan charged $7.7 billion to litigation reserves from 2002 through 2005.
Much of this was related to the bank’s role in the Enron debacle. And J.P. Morgan recovered $781 million of the expense in 2008.
During the next economic cycle, J.P. Morgan reported no litigation charges at the height of the mortgage-led bubble in 2006 and 2007. But the picture changed in 2010, after the financial markets crisis, with the bank’s $7.4 billion litigation expense that year alone almost equal to its 2002-2005 total.
The penalties mounted from there—and keep coming, including about $978 million in the first half of 2015. And yet J.P. Morgan’s $32.3 billion total litigation expense from 2010 through the first half of 2015 still pales alongside its nearly $110 billion in profits during the same time period.
About that JPMadoff book, Chaitman caught the attention of Bernie Madoff himself as she went around filing investor-related lawsuits, and lobbying for legislative reforms. One day in late 2009, while walking down Lexington Avenue on Manhattan’s east side, she says that Madoff’s wife, Ruth, called her mobile phone, and said, “Bernie wants to speak with you.”
Madoff recently had taken up residence at the federal prison in Butner, North Carolina, so Chaitman asked how they could arrange the conversation.
“He will call you collect,” Ruth Madoff replied.
Since then, the two have spoken about 30 times, Chaitman says—talking at length about the swindle and its victims. She planned to visit him in prison, only to have the warden turn down her request, for unexplained reasons. She filed a Freedom of Information Act request to learn why, and was stonewalled again.
“I didn’t know if that was because I was so sexy, or what that was about,” she says. As for why Madoff would want to speak with such a critic, Chaitman says, “I became known as the representative of the victims, and he wanted to have contact with someone in my position, because he wanted to have an impact on his legacy.”
“I’ve got a great deal more information, which I haven’t disclosed,” she adds. But that will keep for her book. “As a result of Madoff, I can’t retire,” she explains. “I’m not unhappy that I have to keep working. But I have no choice about it.”
View more information: https://www.marketwatch.com/story/jpmadoff-pokes-bitter-fun-at-banks-32-billion-in-penalties-2015-08-12