JPMorgan Chase & Co. (JPM:US) Chief Executive Officer Jamie Dimon and board members won dismissal of an investor lawsuit over $2.6 billion in penalties and settlements paid by the bank because of its relationship with convicted Ponzi scheme operator Bernard Madoff.
U.S. District Judge Paul Crotty in Manhattan today threw out the suit, which sought damages on behalf of the bank based on claims that JPMorgan executives and directors turned a blind eye to Madoff’s fraud. The investors claimed the defendants harmed the bank through breaches of fiduciary duty, securities law violations and waste of corporate assets.
In dismissing the case, Crotty said that the investors weren’t excused from the requirement that they demand that JPMorgan’s board pursue the legal claims before filing the suit. Crotty ruled they didn’t show that a majority of the board couldn’t have exercised disinterested and independent business judgment in considering such a demand.
Madoff, 76, pleaded guilty in 2009 to orchestrating the biggest Ponzi scheme in history. He’s serving a 150-year sentence in a North Carolina federal prison. Beginning in 1992, Madoff deposited almost all of the proceeds of the fraud with JPMorgan Chase, Crotty said in his opinion.
Joe Evangelisti, a spokesman for the New York-based bank, didn’t immediately responded to a voice-mail message after regular business hours seeking comment on the ruling.
The case is Central Laborers’ Pension Fund v. Dimon, 14-cv-01041, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at email@example.com
To contact the editors responsible for this story: Michael Hytha at firstname.lastname@example.org Douglas Wong