The U.S. Department of Justice is in the advanced stages of an investigation into whether former traders in JPMorgan Chase's chief investment office in London engaged in criminal misconduct in the marking of credit positions last year, according to someone familiar with the matter.
The Justice Department probe centers on whether a handful of individual traders deliberately mis-marked certain complex credit positions in an effort to mask the growing losses in a key CIO portfolio during the spring of 2012, according to this person.
That portfolio, whose positions in complex corporate-credit securities eventually went badly awry, costing the bank more than $6 billion, eventually took on the nickname "London Whale" because of its geographic origin and size.
In the footnotes of a Feb. 28 filing, JPMorgan acknowledged that the Justice Department and other government agencies were looking in to "losses in the synthetic credit portfolio" managed by the CIO. JPMorgan, the filing stated, "has received requests for documents and information" from the Justice Department, among other entities, in connection with those losses.
Spokespeople for the government did not respond to requests for comment made Friday.
The details of the London Whale trades and the way in which they were marked by traders were subjected to scrutiny at a Congressional gathering in Washington last week. During a six-hour hearing, Sen. Carl Levin and others accused JPMorgan of mis-marking its books, hiding losses, and misleading the public about the size and nature of the losses at various times.
Current and former JPMorgan executives, including former chief investment officer Ina Drew,defended their behavior, while acknowledging that mistakes had been made bytraders and risk managers in the CIO group.
JPMorgan, which issued its own internal report in January detailing a number of missteps, has said "we have made many mistakes" related to the CIO matter, and that the bank had "taken significant steps to re-mediate these issues and to learn from them."
A New York Times story last fall named four former JPMorgan employees as the potential targets of an investigation, then reportedly at an "early" stage: Javier Martin-Artajo, Achilles Macris, Bruno Iksil, and Julien Grout. Lawyers for Martin-Artajo, Macris, and Iksil did not respond to request for comment made Friday.
(A lawyer for Macris declined in an e-mail to comment, and in the Times story, a lawyer for Martin-Artajo said he expected the former JPMorgan executive to be cleared of any wrongdoing. Grout's lawyer could not be determined.)
Revelations of the advanced nature of the Justice Department's criminal inquiry came after JPMorgan Chase's board of directors endorsed Jamie Dimon to remain in his current joint role as both chairman and chief executive of the bank, according to an annual proxy statement issued by the company on Friday.
Calls have been building for Dimon to give up his chairmanship role since it was discovered the "London Whale" had lost billions in this derivatives trade gone awry.