In the latest chapter of the Bernard Madoff Ponzi scheme saga, JPMorgan Chase & Co. executives, including Chief Executive Officer Jamie Dimon, avoided a continued legal challenge.
As The New York Times reported on Wednesday (Jan 6.), Dimon, et al., dodged a legal bullet when a federal appeals court ruled that bank shareholders cannot continue with their bid to further a lawsuit requiring the defendants pay damages to the bank tied to their “alleged ignorance” of the signs that should have led to an uncovering of Madoff’s activities.
The shareholders that brought the suit included the Steamfitters Local 449 Pension Fund in Pittsburgh and the Central Laborers’ Pension Fund in Jacksonville, Illinois.
The 2nd U.S. Circuit Court of Appeals in Manhattan upheld a ruling from a lower court that dismissed claims in 2014 that the banking CEO and a dozen other JPMorgan executives breached fiduciary duty by not looking into Madoff’s activities while the disgraced financier was a client of the bank for years — and a lucrative one. The latest suit came after JPMorgan had said it would pay $2.6 billion to settle other claims against the bank related to Madoff.
The ruling that came down this week said the JPMorgan shareholders did not, in fact, show that the accused executives and directors “utterly failed to implement any reporting or information system or controls” that would have cast doubt on Madoff’s reported returns and how his firm claimed to produce them. NYT said that the Manhattan court also stated that the aforementioned legal hurdle is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.”
The aforementioned shareholders argued that they need not show “utter failure” to put through “any” controls — just “reasonable” ones.