The $9 billion witness
A whistleblower is finally talking publicly about how Chase knowingly sold crappy mortgages through various financial instruments for millions of dollars to unsuspecting investors like credit unions. She had been talking privately with the SEC and other regulators on and off all these years.
It goes without saying that the ordinary citizen who is the target of a government investigation cannot simply pick up the phone, call up the prosecutor in charge of his case and have a legal proceeding canceled. But Dimon did just that. "And he didn't just call the prosecutor, he called the prosecutor's boss," Fleischmann says. According to The New York Times, after Dimon had already offered $3 billion to settle the case and was turned down, he went to Holder's office and upped the offer, but apparently not by enough.
But the deal's most brazen innovation was the way it bypassed the judicial branch. Previously, federal regulators had had bad luck with judges when trying to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart deals worked out between banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real punishments.
Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showing the settlement to a judge. The settlement, says Kelleher, "was unprecedented in many ways, including being very carefully crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds and prevent public scrutiny of their sweetheart deal." Kelleher asks a rhetorical question: "Can you imagine the outcry if [Bush-era Attorney General] Alberto Gonzales had gone into the backroom and given Halliburton immunity in exchange for a billion dollars?"
Because most of the settlement monies were specifically not called fines or penalties, Chase was allowed to treat some $7 billion of the settlement as a tax write-off.
But December came and went with no follow-up from the DOJ. She began to wonder: If she was the government's key witness, how was it possible that they were still pursuing a criminal case without talking to her? "My concern," she says, "was that they were not investigating."
The government's failure to speak to Fleischmann lends credence to a theory about the Holder-Dimon settlement: It included a tacit agreement from the DOJ not to pursue criminal charges in earnest.
The Federal Home Loan Bank of Pittsburgh, which had sued Chase, asked the court to force Chase to turn over a copy of the draft civil complaint that was withheld after Holder's scuttled press conference. The Pittsburgh litigants also specified that they wanted access to the name of the state's cooperating witness: namely, Fleischmann.
In that case, the judge actually ordered Chase to turn over both the complaint and Fleischmann's name. Chase stalled. Later in the fall, the judge ordered the bank to produce the information again; it stalled some more.
Then, in January 2014, Chase suddenly settled with the Pittsburgh bank out of court for an undisclosed amount. Months after being ordered to allow Fleischmann to talk, they once again paid a stiff price to keep her testimony out of the public eye.
