11/19/2012 12:29:00 PM EST
My Big Fat Overrated CEO: McKenna on Dimon on the Keiser Report
I taped an episode of the Keiser Report last week while in New York. The focus was
Jamie Dimon with a bit of MF Global thrown in for heat. Max Keiser, the host,
asked me, "Why does Jamie Dimon of JPMorgan still have a job?"
Hard to say.
predicted in January that Dimon would have his "comeuppance" in 2012, the
prognostication was predicated on backlash from the bank's involvement, as MF
Global's main banker, in the failure of that broker/dealer and FCM.
The broker-dealer's customers have accused JPMorgan of
taking advantage of MF Global's weak position to hold onto hundreds of millions
of their funds, but JPMorgan says it was not the culprit. The MF Global story
is one-year old but so far the trustees haven't directly sued anyone. The
backlash to JPMorgan and Dimon has been practically nil. Jon Corzine, CEO of MF
Global, and his banker Jamie Dimon, have not suffered the consequences I
thought they would.
The customers have finally sued PricewaterhouseCoopers, the MF Global auditor,
for its role in the failure. The MF Global Trustee assigned its claims against
several parties to the customers, partly, I believe, to avoid the conflicts the
Trustee has with PricewaterhouseCoopers, the auditor, and JPMorgan. But
JPMorgan was dropped from the suit and is, for now, not a defendant. I suspect
the bank is negotiating a settlement so it can scratch this mess off its long
list of "litigation to dispose of".
Because Jamie Dimon is facing a very long list of
regulatory and legal challenges.
JPMorgan took advantage of the break from MF Global to
make more trouble for itself. The toll for the "London whale" trades is a $5.8
billion loss, making Dimon's early dismissal of the issue as a "tempest in a
teapot" quite embarrassing. Initial estimates of the loss hit first-quarter
results but those numbers were wrong. An expedited internal investigation found
that traders mismarked trades to minimize the reported loss. The quarterly
securities filing had to be formally restated. The "whale" loss has also
attracted shareholder suits from six public pension funds.
Dimon did face some music at the annual meeting in May.
He admitted the "whale" trades were "poorly constructed, poorly reviewed,
poorly executed and poorly monitored." But he doesn't seem to be losing any
sleep over them and, so far, holds
on to his compensation package. Investors, the board and regulators did not
become aware of the trade price manipulation until August. The SEC and
Department of Justice are still investigating the loss.
Read this article in its entirety at the re: The Auditors, a blog
by Francine McKenna.
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