If the safety and soundness of America’s banks are among your concerns, you can sleep more soundly at night. The Department of Justice last week slew Charlie Javice, the Willie Sutton of our times. In addition to his daring heists, Sutton is remembered for his cogent explanation as to why he robbed banks.
“That’s where the money is,” Sutton famously explained.
Javice, who is all of 33, was convicted last week of three counts of fraud and one count of conspiracy to commit fraud for snookering JPMorgan Chase, America’s biggest bank, when it acquired her student loan company Frank for $175 million. JPM’s trusting bankers took Javice at her word that Frank had some four million customers. The number was closer to 300,000.
Javice faces the possibility of spending more than 17 years in prison, thanks to Assistant U.S. Attorney Rushmi Bhaskaran, the University of Pennsylvania Law School grad who oversaw her prosecution. Javice is a graduate of Penn’s Wharton Business School.
That JPM’s top bankers were so trusting of Javice likely will come as a surprise to the bank’s legions of mortgage customers, of which I’m one. When I applied for my mortgage loan, the bank required proof of my taxes, income, and savings. It didn’t trust my judgment that I was paying a fair price for my home. JPM arranged to send an appraiser to independently determine if the price I agreed to pay was reasonable. It took me about an hour to review all of JPM’s mortgage documentation.
Rounding error
Given that $175 million isn’t even a rounding error for a bank with $279 billion in annual revenues — heck, JPM CEO Jamie Dimon has a net worth of $2.4 billion and the amount would be petty cash even for him – one might expect that JPM relied on Mildred in accounting to review and rubber-stamp the deal, particularly given that Dimon himself reportedly pushed for a speedy close.
Nope. The Wall Street Journal’s Alexander Saeedy, the rare corporate media journalist who doesn’t regard himself as a court stenographer for prosecutors, reported that Frank’s purchase received approvals from the highest levels at JPM, including the two executives who were co-heads of Chase’s bank and credit-card business, Marianne Lake and Jennifer Piepszak. Lake is considered a candidate to run JPMorgan after Dimon and Piepszak was just named chief operating officer.
Leslie Wims Morris, who quarterbacked the Frank deal for JPM, sent a note to her team underlining segments from Dimon’s annual letter to investors in 2021, including a line saying that sometimes “there’s no need to do analysis at all.” Javice’s attorneys said in court that the letter showed Morris’s team wanted the deal so badly that they didn’t think they needed to check their work. Wims Morris testified her comment was “a joke to my team.”
Wims Morris strikes me as a real hoot, the life of JPM’s holiday celebrations. Given that she serves as a vice chairman of the Dance Theater of Harlem and presumably has an appreciation for entertainment, perhaps she might consider a career in comedy instead of overseeing JPM’s $88 billion car loan portfolio.
Not all of Jamie Dimon’s crack team of senior financial executives were so trusting of Javice and awed by her fawning media coverage, including being named to Forbes magazine’s 2019 “30 under 30” list, increasingly an accurate predictor of future Olympian scamsters.
Sarah Youngwood, a more than 20-year veteran who served as CFO of JPM’s consumer and community banking business, reportedly expressed concerns about the accuracy of Frank’s user data. However, at Javice’s trial, Youngwood invoked the Sgt. Schultz defense when asked by Javice’s lawyers about being the lone holdout on JPM’s deals team opposing the Frank acquisition.
“I don’t remember the sequence,” said Youngwood, who is now CFO of Nasdaq. Perhaps I’m being overly skeptical, but a possible reason for Youngwood’s memory impairment is that she wouldn’t want to alienate Dimon for fear of losing some of Chase’s lucrative initial public offerings on various exchanges, including Nasdaq.
Sindhu Subramaniam, who worked in the corporate development team for Chase, also doesn’t strike me as a candidate to buy my Brooklyn Bridge holdings. In a Skype message to her boss, Subramaniam asked: “how do we verify (Javice’s) claims of access to 5M[illion] households,” because “absent tangible revenues—how will we even know.”
Wouldn’t you know it, Subramaniam left Chase in June 2022 to join the Philadelphia office of LPL Financial, which speaks well of that San Diego-based firm but is another red flag about Dimon’s leadership.
Notably, conscientious JPM executives who raise concerns amid allegations of wrongdoing curiously leave the bank after decades of service. As I reported in my in my Celebrating JPMorgan Chase’s Heroes post in June 2023 about evidence that emerged in connection with JPM’s $290 million settlement with victims of Jeffrey Epstein, there were two senior JPM executives with impressive credentials and years of service who questioned the bank’s relationship with the convicted child sex offender and subsequently left the bank.
Perhaps one or even two departures were just coincidental, but four? Why can’t Dimon retain senior employees with proven superior judgment? I’d expect the potty mouth CEO would reserve his best invective for the executives involved in mind-boggling screwups causing JPM considerable embarrassment, prompting them to bolt.
It’s also telling how the typically slow-moving wheels of justice accelerated like a Tesla Model S to take down Javice. WSJ’s Saeedy reported that JPM sued Javice in December 2022 and within four months, the feds arrested her at Newark airport. The SEC is also prosecuting Javice, making me wonder why the feds don’t just administer some waterboarding torture, tear off her fingernails, and then ship her off to El Salvador’s infamous prison.
Rest assured, if Javice had allegedly defrauded a small family-owned business with inflated numbers, the case wouldn’t be worth the DOJ’s time.
Some perspective is in order. The DOJ in 2020 let JPM off with a measly $900 million fine to resolve criminal charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.
While some JPM traders took the fall and did some jail time, Dimon was unscathed. Indeed, Dimon’s 2020 compensation was $31.5 million, and comically most of it was performance based.
There has been shockingly little coverage or outrage about WSJ’s recent scoop that Boeing is seeking to withdraw an earlier agreement to plead guilty in a long-running criminal case that blamed the company for deceiving regulators before two deadly crashes of 737 MAX jets.
The Journal reported that the aerospace giant is seeking more lenient treatment from the Justice Department, which under the Trump administration is reviewing numerous pending criminal cases that haven’t yet gone to trial or been approved by courts.
Boeing last year agreed to plead guilty to defrauding the Federal Aviation Administration. But a federal judge in Texas rejected the proposed deal in December, saying it inappropriately required the court to impose diversity considerations on the appointment of an outside monitor who would oversee Boeing’s future legal compliance.
The Boeing settlement related to two devastating crashes involving the company’s 737 MAX aircraft, resulting in the loss of 346 lives. Investigations revealed significant negligence, including deliberate concealment and minimization of safety concerns. Boeing executives were found to have prioritized profitability over safety, leading to the catastrophic outcomes.
Unlike Javice, whose alleged financial fraud caused no material hardship to anyone but herself, Boeing executives oversaw decisions contributing directly to fatalities. Internal communications uncovered by investigators showed Boeing employees openly questioning the aircraft’s safety long before the crashes occurred, yet company leadership continued production without adequately addressing these alarms.
Boeing reportedly is hoping to reduce the $243 million fine it agreed to last year. Between 2010 and 2019, the company spent about $43.4 billion on stock repurchases and nearly $22 billion on dividend payouts. The company suspended the payouts after the 737 MAX crashes.
Then there’s the $500,000 love tap the DOJ ordered GM’s driverless Cruise subsidiary to pay to settle criminal charges for providing a false record to National Highway Traffic Safety Administration (NHTSA) with the intent to impede, obstruct, or influence the investigation of a crash involving one of Cruise’s autonomous vehicles.
The so-called deferred prosecution agreement was the second one for GM CEO Mary Barra, who was chair of Cruise’s board of directors and repeatedly talked up the company’s advancements, making it likely that she played an active oversight role. In 2015, GM under Barra agreed to another deferred prosecution agreement to resolve criminal charges that it failed to disclose a safety defect to NHTSA and misled U.S. consumers about that same defect.
More than 124 people died and more than 260 were injured because of that negligence. Not one GM executive was charged, let alone convicted, because of the automaker’s disregard for safety.
As noted in considerable detail in this post last June, the DOJ was a joke under the Biden administration, just as it was during President Trump’s first term. These days, Trump is handing out pardons like candy, including one to Trevor Milton, the founder of the EV startup Nikola, who allegedly defrauded investors and convinced GM to take an 11% stake in his company—yet another of Mary Barra’s embarrassments.
Charlie Javice has suffered enough at the hands of “justice.” She was a privileged twenty-something who hadn’t yet learned the dangers of “faking it until you make it,” particularly when dealing with a bank overseen by a CEO like Jamie Dimon. If I were Dimon, I would have preferred to avoid prosecuting Javice, if only to prevent calling attention to my bank’s pathetic due diligence practices and the departure of executives who demonstrated superior judgment.
Count me among those who would support a presidential pardon for Javice so she can move on with her life. Frankly, with more training and mentorship on avoiding the consequences of wrongdoing, I could imagine her as a worthy successor to Jamie Dimon.