JPMorgan Chase Had No Treasurer When Chief Investment Office Made Trades Resulting In More than $2B Loss, Reports WSJ

According to the Wall Street Journal, during five of the months when JPMorgan Chase’s (JPM) Chief Investment Office made the trades that has led to over $2 billion in losses, the financial firm lacked a treasurer. Also, the executive appointed to head up department’s risk management might not have had the necessary experience to do the job. A few ex- and current employees of the financial firm have alluded to poor decisions in staffing as a reason that bad positions were allowed to go unchecked.

Apparently, until the appointment of Sandie O’Connor as treasurer was announced in March, the last person to hold that position was Joseph Bonocore. He left the financial firm in October 2011, which was before trading losses soared. Prior to leaving, he expressed general worries about risks that were being made by the JPMorgan’s London office, which is where many of the questionable trades originated. (He also had previously served as the investment unit’s chief financial officer for about 11 years.) Now, questions are being raised by those on the outside as to how a bank as big as JPMorgan could go so long without a treasurer.

As for its chief risk officer, Irving Goldman, he is related by marriage to JPMorgan executive Barry Zubrow. Goldman was moved into the post this February, one month after Zubrow was made the bank’s chief of corporate regulatory affairs. Goldman’s background in trading is extensive. He previously worked for Salomon Brothers, Credit Suisse First Boston, and Cantor Fitzgerald (CANTRP), where he also was president of its asset management and debt capital markets divisions. A JPMorgan spokesperson defended Goldman’s professional background, saying it wasn’t uncommon for a risk manager to be heavy on trading experience.

In February, Zubrow, Goldman and now ex-chief investment officer head Ina Drew and former CFO John Wilmot reportedly told Federal Reserve officials that new regulations might impede a banking entity’s ability to properly manage its structural risks. They contended that certain types of trading (including the trading that has led to this major loss) shouldn’t be part of a proposed proprietary trading ban under the Volcker ruler.

Although JPMorgan’s Chief Executive James Dimon had announced $2 billion trading loss, additional losses have continued to accrue by up to $150 million a day since his announcement last week. The losses may eventually exceed $5 billion.

JPMorgan has acknowledged that it employed a strategy that was not only badly designed but also poorly executed. It is conducting its own internal probe in conjunction with outside auditors. Meantime, the US Justice Department and a number of regulators, including the SEC and the Federal Reserve, have opened their own investigations into the losses.

Shepherd Smith Edwards and Kantas, LTD, LLP wants to hear from individual institutional investors affected by JPMorgan Chase’s trading losses, contact our securities fraud attorneys today.

Key Void at Top for J.P. Morgan, The Wall Street Journal, May 17, 2012

JPMorgan Chase Chief Investment Office Played By Different Rules, Huffington Post, May 16, 2012


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