According to Alayne Fleischmann, the whistleblower who gave the evidence which helped resident in a $13 billion mortgage settlement from JPMorgan Chase(JPM) to the U.S. Department of Justice last year, that amount was not enough. Fleischmann, a lawyer, joined the financial firm as a deal manager in 2006.
She says that not long after she started working there she noticed that about half of the loans in a multimillion-loan pool included overstated incomes. Such loans, she said, were likely at risk for default—a precarious position for both the investors and the securities. Fleischmann said that she notified management about how the bank was re-selling subprime mortgages to customers without letting them know about the risks. She also spoke about how one bank manager wanted to put in place a non-email policy so there would be no paper trail to show that the firm was aware that such activities were happening.
It was the sale of toxic sub-prime loans by JPMorgan and other US banks that incited the US housing market crisis, which eventually spurred the global financial meltdown of 2008. Repackaged loans were sold to pension funds and other institutional investors, with many buyers unaware of the high default risks involved.
Fleischman was let go from JPMorgan in early 2008. The U.S. Securities and Exchange Commission reached out to her later that year. Even though she had signed a non-disclosure agreement when leaving the firm, this did not preclude her from talking about criminal wrongdoing, including the selling of toxic sub-prime mortgage products.
Prosecutors used the information to negotiate a $9 billion mortgage fraud settlement with JPMorgan, in addition to $4 billion relief for homeowners that included mortgage modifications for homeowners at risk of foreclosure. Yet no criminal charges have been brought in this matter.
After signing an approximately 10-page “statements of fact, JPMorgan Chase CFO Marianne Lake spoke out, noting that despite the settlement, the firm was not admitting to having violated any laws. The settlement did not even have to pass court approval. The firm also was able to take some $7 billion of the settlement and use it as a tax write-off.
Fleischmann, who recently outed herself as the whistleblower in a Rolling Stone article, believes that individuals who took part in the infringements that lead to the housing crisis should be held responsible for their crimes. According to journalist Matt Taibbi who wrote the article, she said that a number of other historical settlements with the DOJ, including those made with Bank of America (BAC) and Citigroup (C) were actually deals in which “cash for secrecy,” was the trade.
Institutional investors were the ones that suffered when they were sold toxic sub-prime mortgages instruments. Our mortgage-backed securities fraud lawyers have been working hard over the last six years to help investors recoup their losses. Contact the SSEK Partners Group today.
‘Occupy made it possible’: JPMorgan whistleblower Fleischmann to Max Keiser, RT.com, November 13, 2014
JPMorgan settlement not enough, says whistleblower, CNBC, November 12, 2014
JPMorgan agrees to $13 billion mortgage settlement, CNN, November 19, 2013
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