Losing Faith In JPMorgan

Self-dealing allegations of JPMorgan Chase & Co. made by two churches expose an area inside the largest U.S. bank that illustrates the potential for conflicting interests—a trust business that invests in the bank’s own products. 

The churches say that JPMorgan, which was entrusted to manage funds to support the churches’ good works, put its own financial interests first.  The claims came after other religious orders pressed the bank for a report on its business standards, prompting it to release almost 100 pages last month describing its efforts to augment ethics and compliance. 

Christ Church Cathedral in Indianapolis said JPMorgan breached its duty as trustee by investing the church’s $31 million trust largely in products that generated revenue for the bank, with some fees exceeding 8 percent a year. The bank invested in these and other “toxic” products, the church alleged in an August lawsuit, resulting in a “surreptitious transfer of wealth from the Christ Church trusts to JPMorgan.”  These decisions cost the trust $13 million over nine and a half years, said the church suit. 

JPMorgan has denied wrongdoing in connection with its trust business and said the trust had a positive return from 2006 to 2013.  The bank stepped down as Christ Church Cathedral’s trustee a year ago, and in October sought to dismiss the suit saying the church did not have standing to file a securities claim in part because it did not buy or sell securities and the allegations were not specific.  “The church is painting a grossly inaccurate picture of how the trust was managed, cherry-picking funds that did not perform well and failing to mention multiple funds that performed very well.”

See Neil Weinberg, Losing Faith in JPMorgan, Two Churches Claim Self-Dealing, Bloomberg Businessweek, Jan. 8, 2015.