Jamie Dimon’s $13 Billion Secret
DIMON MAKES THE CALL
By late August, Wagner says, “the effort to put together a global negotiation was floundering.” He turned his attention back to the civil complaint he was preparing against JPMorgan. West was trying to see if a deal could be reached after Labor Day; if not, Wagner’s complaint would be filed. Schneiderman remembers thinking, “In September, this is either going to go forward or it’s going to go off the rails.”
On September 5, Richard Elias, an assistant US Attorney in Wagner’s office, sent Bruce Yannett, an attorney at Debevoise & Plimpton representing the bank, an e-mail with the subject line “JPMorgan—Confidential Settlement Negotiations.” Elias asked if Yannett wanted to see a draft of Wagner’s complaint, and Yannett responded that he did.
“Our purpose in sharing it with them was to show them that we were serious,” says a Justice Department official. “And if they were serious in trying to resolve it, they would see that we had fairly serious and well-founded allegations.”
Wagner’s complaint got Dimon’s attention. “It certainly quickened the pace of discussions,” Wagner says. “We were providing it to them, I think, both to show that we thought we had a very strong case, and also that it was coming very soon.” Cohen is convinced the potential filing was the tipping point. “What it meant was that this was all going to be splashed out in a filed complaint,” he says. “And I think once you start going public with allegations, it makes it more difficult for both sides to settle.”
Inviolate parameters for the negotiations were established quickly. JPMorgan wanted to resolve any potential criminal charges as part of the overall settlement. It didn’t want any statement of facts regarding wrongdoing by its bankers, and it wanted a broad release from future litigation. West responded that a statement of facts and the possibility of criminal charges were non-negotiable. “There were always some red lines that had been drawn, and each time JPMorgan chose to continue to engage,” he says. The bank increased its offer to $3 billion in cash and $4 billion in mortgage relief, and the Justice Department came down to $15 billion in cash, plus mortgage relief. In other words, the two sides were still far apart. “We had gotten as close as we could,” West recalls. The Justice Department decided to file Wagner’s complaint on September 24. Wagner flew to Washington for the press conference.
Late on the night of September 23, West had a heated conversation with Stacey Friedman, another senior JPMorgan lawyer. “It was clear that we had reached an impasse,” West recalls. He told Friedman that the Justice Department was planning to file Wagner’s complaint the next morning. Then he called Wagner and alerted him to the possibility that the negotiations could reopen at the last minute. (At around the same time that night, Schneiderman called Cohen and encouraged him to come back with one more offer.)
West called Friedman back early the next morning. “You never want to make big decisions when you are emotionally charged,” he says. “I wanted to make sure that the passion that we were both making our arguments with wasn’t clouding what we were saying to one another—that we actually understood what our positions were.”
But the same divisions prevailed: Friedman wanted the Justice Department to drop the threat of a criminal charge; she did not want a statement of facts; and she could not get remotely near West’s asking price. She also told West that Dimon might want to call him directly. West didn’t think much of it, because it seemed clear that the two parties weren’t going to be able to bridge the gap.
Thirty minutes later, Dimon called West and said, “I kind of think it’s important, when the stakes are this high, that the principals get to know one another.” The twenty-minute conversation was pleasant enough, West recalls. Dimon said that he wanted to come to Washington to meet with him and Holder and share his side of the story.
Dimon reiterated his mantra that it was “unfair” to hold JPMorgan responsible for wrongdoing at Bear Stearns and Washington Mutual—especially since the firm had bought Bear at the urging of the previous administration. West clarified that the complaint centered on alleged wrongdoing at JPMorgan itself, not Bear or WaMu, and he told Dimon that he wouldn’t arrange a meeting with Holder or postpone the filing of Wagner’s complaint unless Dimon agreed to two conditions: the meeting had to be held as soon as possible, preferably that day or the next, and Dimon had to agree to a significantly higher number than the $3 billion in cash that was on the table. Dimon said he thought September 26 might work but that he needed to check his schedule.
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