Jamie Dimon’s $13 Billion Secret
Afterward, West went into the office, where his first meeting of the day was with Holder and James Cole, the deputy attorney general, in Holder’s conference room. Just as he was telling the two men about his call with Dimon, his cellphone rang. It was Dimon again. West took the call, pacing back and forth at the far end of the room. Dimon proposed a meeting on September 26 and assured him that the bank would come back with a significantly increased offer. West agreed to recommend that Holder postpone the filing of Wagner’s complaint and meet with Dimon. That was an unprecedented move. It’s not every day that the attorney general of the United States postpones the filing of a civil complaint against a powerful Wall Street bank at the request of its CEO so that the two sides can cut a deal in private. Whatever was in Wagner’s complaint, Jamie Dimon did not want it to become public knowledge.
At one point in their second conversation, one person close to the negotiations recalls, Dimon started to chuckle and said something to West like, “You have so much power. You have no idea how much power you have.” West waved off Dimon’s assertion. “No, no, you have so much power,” Dimon repeated.
“Well,” West replied, “I’m not a Master of the Universe like you.” Dimon laughed and told West he would see him Thursday. The conversation with Dimon, plus those West was having with Cutler and Friedman, suggested that JPMorgan was planning to offer $6 billion to $7 billion in cash, plus $4 billion in mortgage relief. That estimate was not enough to stop the clock, but it was enough to buy some time. If the bank was willing to double its previous cash offer, West figured, he could probably get it into double digits.
For his part, Wagner was disappointed that the complaint would not be filed. “I had my nice blue suit on, and I was ready for the cameras,” he says. “Being out here in Sacramento, you don’t always get the opportunity to step on a national stage, so at a personal level, it was somewhat deflating. But on the other hand, you don’t let ego get in the way of these things. You want to do what’s right—not only for my case in the Eastern District of California, but for the department and the government generally. I’ve always been a team player, so it was back to negotiations.”
On September 26, Dimon, Cutler, Friedman and Matt Zames, the bank’s chief operating officer, met with Holder, West, Wagner and Cole in Holder’s fifth-floor office at the Justice Department. “They tell the story of JP and what’s happened with Bear, with WaMu,” a Justice Department official recalls. “They lay out their view of the case and the exposure, and they put on the table a $7 billion offer, which is sort of a global offer”—one that would resolve all the state and federal cases plus the federal agency cases. The litigation they were most eager to resolve was Wagner’s case. “They were concerned about that exposure.”
Wagner says the meeting was cordial: “Clearly they had brought the big guns to show that they were serious about wanting to negotiate.” Despite Dimon’s requests, Holder told the JPMorgan contingent at the meeting that any settlement would not eliminate the possibility of future criminal prosecution against the bank or individuals there. “They left with an absolute clear understanding that there was no way they were going to get the criminal case relieved through a settlement,” West says. (For the record, there has not been the slightest inkling that the Justice Department is working on a criminal complaint against JPMorgan Chase.)
At one point, Cutler warned that JPMorgan wouldn’t agree to a criminal charge. “We’re not going to do that,” he said. “Listen, we may not resolve this thing.”
Cohen recalls that “Jamie had a clear message—that the bank is represented by him, that he was very interested in a global settlement, that he was committed to getting it done. And there is a certain significance when the CEO does that. I think Holder himself was constructive, very can-do at that meeting, not by the specifics but by the tone he set. And it was a tone of ‘Let’s really see if we can get this done, and we do have some understanding for some of your positions.’ And when the attorney general speaks like that, presumably everybody else in the room on the government side understood where he was coming from.”
After the meeting, West and Cutler got to work on a comprehensive deal. Three separate working groups were established: one to draft the releases from future liability, one to reach an agreement on the cash settlement—which was mostly just back-and-forth between West and Cutler—and one to draft the required statement of facts. “There was concern that that was going to be very, very difficult,” West says.
The whole process was extremely tense. “There would be these bursts of energy,” according to one person involved in the negotiations, “and it would look like we were getting right to the end, and then there would be something that tanked the whole deal.” A real stickler was the amount of cash the bank would agree to pay. A week after the meeting, the Justice Department ordered everyone to stop working until the money point had been resolved. West was concerned that his negotiators would get the non-monetary aspects resolved but then get low-balled on the money. He insisted on getting $10 billion in cash, hoping he could get $9 billion. Cutler and JPMorgan were at $7.25 billion.
In mid-October, after negotiating directly with Holder again, this time by phone, Dimon agreed to settle the cases with $9 billion of his shareholders’ cash plus $4 billion in mortgage relief. The breakthrough allowed the working groups to restart, but soon Holder and West became concerned that JPMorgan would try to seek a reimbursement from taxpayers for the billions it was paying to the FDIC and other government agencies. “That issue almost derailed the entire thing,” West says.
Cutler told the Justice Department officials that JPMorgan’s board had approved the deal on the assumption—however perverse—that the bank would be able to get a reimbursement. Another tense moment came when the bank sought to credit against the settlement $1.1 billion in payments to the FHFA concerning separate contractual claims. The Justice Department was ready to file Wagner’s complaint within forty-eight hours of that conversation.
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