Federal authorities are preparing to take action in a criminal investigation of JPMorgan Chase, suspecting that the bank turned a blind eye to Bernard Madoff’s Ponzi scheme, the New York Times report. The Madoff case, on the heels of a tentative $13 billion settlement over JPMorgan's mortgage practices, poses a major threat to the reputation of the nation's largest bank.
Reflecting the magnitude of the case, prosecutors and JPMorgan have held preliminary discussions about a deferred prosecution agreement. Such an arrangement would suspend criminal charges against JPMorgan in exchange for a fine, other concessions and an acknowledgment that the bank will face charges if it fails to behave. Prosecutors may require JPMorgan, which has repeatedly said that “all personnel acted in good faith” in the Madoff matter, to hire an independent monitor. While deferred-prosecution agreements are the Justice Department's preferred tool for punishing corporate giants, because they allow prosecutors to appear tough without imperiling a company's health, they are typically deployed only when misconduct is severe. They are nearly unheard of for a large U.S. bank.