The Christ Church Cathedral of Indianapolis is suing JPMorgan (JPM) for securities fraud. The church contends that the financial firm purposely mismanaged its money over the last ten years, causing $13 million in losses. Eli Lilly, the founder of pharmaceutical giant of the same name, gifted a large trust fund to the Episcopal congregation. Mr. Lilly appointed three local banks as trustees but JPMorgan became involved after it acquired two of the banks in 2004.
Court filings claim that once JPMorgan came on board the church’s portfolio of stocks and bonds were replaced by the firm’s own funds, including alternative investments, which involve higher fees paid to the firm. Over eight years the firm’s management fees went up from $35K to $177K, while it reaped in additional fees for selling proprietary products. By the close of 2009, the church was invested in over 50 investment funds— 75% of those were in the firm’s own products.
In 2004, when the firm took over the church’s trust fund, the congregation had $34.6 million. By the end of 2013 it had $31.6 million. Because of this, the congregation has been unable to do all of its charitable works. The church believes that its investment strategy should have let it take money from its endowment to fund its aid work without losing any money. The Christ Church Cathedral of Indianapolis wants JPMorgan to pay back the $13 million losses, which includes lost profits.
The Christ Church Cathedral does not appear to be an isolated situation of alleged church endowment mismanagement at JP Morgan. For example, last year the Episcopal Diocese of West Virginia and Sandscrest Foundation sued J.P. Morgan Chase, the Helen T. Sands Testamentary Trust, and its trustee. The church claimed breach of duty of prudence, breach of duty of loyalty, and breach of the duty to give information to beneficiaries.
According to filings in that case, following the final wills and testaments of Helen and Harry Sands, about 250 acres of land in Ohio were moved to Sandscrest Foundation Inc. While J.P. Morgan Chase used the net income for different charitable organizations, as the will instructed, it purportedly did not provide enough funding to the foundation to maintain the original property.
Just like individual investors, Institutions may also fall victim to securities fraud and mismanagement by financial professionals. If you believe you were the victim of institutional investor fraud, contact The SSEK Partners Group today.
Indiana church sues JPMorgan for millions, CNN, January 24, 2015
Groups say bank mismanagement trust funds, The West Virginia Record, April 16, 2014
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