JPMorgan Fights Paying ‘Unconscionable’ Legal Fees for Frank Founder

Startup founder Charlie Javice was sentenced to prison in September for defrauding JPMorgan.

The legal battle around her trial, however, is still going on, as Bloomberg News reported Wednesday (Dec. 31).

At issue are the legal fees the banking giant is required to pay under a 2023 court order. JPMorgan says Javice’s “unconscionable” $74 million in legal fees included more than $5 million in charges for lawyers and other staffers just for attending her fraud trial, even for days court wasn’t in session.

Javice was convicted of fraud in March after being charged with overstating the customer base of her student loan financing platform Frank. She was sentenced to spend seven years in prison and pay $22.36 million in forfeiture and $287 million in restitution to JPMorgan.

The company had been acquired by JPMorgan in 2021 for $175 million. That acquisition made Javice an employee of the banking giant, leading her to argue that she was thus entitled to legal coverage under JPMorgan’s policies.

According to Bloomberg, a new court filing provides the most details so far about the bank’s claim that Javice is abusing the 2023 court order. JPMorgan hopes to avoid paying $10.2 million in disputed charges, and end the requirement that it cover future bills.

The filing argues that attorneys at Javice’s five law firms billed unnecessary work and inappropriate items like expensive restaurant dinners, alcohol, hotel room upgrades and $529 worth of gummy bears under the rationale that “someone else is paying her bills.”

Despite these allegedly improper expenses, Bloomberg notes that the time charged by attorneys and other staff to the tune of more than $2,000 an hour in some cases was the largest factor in the legal bills.

JPMorgan had sued Javice and fellow Olivier Amar, saying it had purchased Frank believing the startup had about 4.3 million customers but later learned that the actual number was around 300,000. Javice and Amar had been accused of creating millions of fake accounts to mislead the bank as it was mulling the deal. Amar was also convicted of fraud and has since been sentenced to five years in prison.

At trial, defense attorney Jose Baez had argued that the bank carried out extensive due diligence into Frank, and knew how many customers the startup had before making the purchase. The defense contended that JPMorgan only said it was tricked after financial aid regulations changed, and fraud was the only condition that allowed it to exit its contract.