The Police Retirement System of St. Louis is suing JPMorgan Chase (JPM) CEO Jamie Dimon and several other senior bank officers over the “London Whale” scandal. The pension fund, which owns 39,000 of the investment bank, is one of numerous investors seeking compensation. Dimon and the other JPMorgan executives are accused of disregarding the red flags indicating that the London-based operation was engaged in taking large scale risks that ultimately resulted in close to $6 billion in losses last year.
In its derivatives lawsuit, the Police Retirement System of St. Louis contends that the defendants “eviscerated” the risk controls of JPMorgan’s London unit to up profits. Even after the media reported that one of the bank’s traders in London was making big bets (that trader was eventually dubbed the “London Whale”), Dimon downplayed the news to investors. The pension fund contends that the executives and others breached their duties to shareholders by not stopping the risky trades.
In March, US lawmakers sought to understand the multimillion-dollar trading loss. At a hearing before Congress, they questioned past and current JPMorgan executives about the financial scandal. Their interrogation came a day after the release of a damning 300-page Congressional report that blamed the bank’s lax culture while also criticizing the Office of the Comptroller of the Currency for also failing to follow up on warning signs.
The executives tried to defend themselves, saying their attempts to lower risks were countered by traders that purposely undervalued bets to conceal an increase in losses. Among the executives that gave testimony was ex-JPMorgan chief investment office head Ina Drew, whose group was in the middle of the debacle. She too blamed lower-level traders and others, while contending that she had been given inaccurate information. Drew said she didn’t know that traders were upping their bets.
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