For nearly a decade, executives at JPMorgan Chase managed to avoid questions about their decision to keep Jeffrey Epstein as a client, while the convicted sex offender was accused of trafficking and abusing dozens of girls.
Now, more than 20 employees at the US bank, including star managers, are being investigated for communications in two lawsuits, and some will testify under oath about their alleged involvement.
As more senior staff are dragged in, lawyers for JPMorgan are trying to prevent chief executive Jamie Dimon from being fired from lawsuits brought by Epstein’s alleged victims and the US Virgin Islands, where the homeless financier has a home.
At the heart of the case are a series of emails between JPMorgan employees that provide a comprehensive picture of the bank’s internal deliberations over its relationship with Epstein, who committed suicide in 2019 while awaiting trial.
And new extracts from 1,200 emails between Epstein and Jes Staley, then a senior private banker at JPMorgan before becoming chief executive of Barclays, have piled fresh pressure on UK bank boards.
Barclays’ board had supported Staley before he was forced to resign over the emails, some of which contained unexplained references to “Snow White” and “Beauty and the Beast”, while others were revealed to contain what the US Virgin Islands lawsuit claims. described as “a photograph of a young woman in a seductive pose”.
JPMorgan’s Epstein problem
Senior JPMorgan figures such as Mary Erdoes – the head of the bank’s $4tn asset and wealth management business – could face hours of questioning this month, according to court filings, as the case nears trial.
Erdoes, a 27-year JPMorgan veteran and one of Dimon’s top lieutenants, is the highest-ranking person at the bank to be ousted, having held senior supervisory roles and headed the division that managed Epstein’s money.
“Mary has always acted with the highest level of integrity and professionalism and she informed this client 10 years ago that her relationship with our firm was terminated,” JPMorgan said in a statement.
At issue in both cases is whether JPMorgan was responsible for facilitating Epstein’s sexual harassment by failing to recognize and act on red flags. The bank’s lawyers described the Virgin Islands complaint as “meritless”, and the complaint of Epstein’s alleged victims “directed at the wrong party”.
Hundreds of thousands of documents detailing internal communications at JPMorgan between 23 staff members – including Erdoes – are set to be handed over to the plaintiffs’ legal team. Lawyers for all sides still argue that Dimon’s communications will be handed over.
Court documents have shown evidence that JPMorgan executives ignored at least five warnings by risk and compliance teams about Epstein’s links to child trafficking and the molestation of young girls.
JPMorgan became aware of the Epstein problem in early 2006 when the company’s global security division alerted executives to reports of Epstein’s indictment in Florida on charges of soliciting minors.
At the time, Epstein had been a client at JPMorgan’s private bank for eight years. Despite the warning, JPMorgan kept Epstein’s business but classified the account as “high risk,” a tag that requires special approval.
In 2007, Epstein’s victim was accused of paying $10,000 after she was raped in the US Virgin Islands, whose lawyers claimed that Epstein’s associates had withdrawn from JPMorgan for the cash.
Epstein eventually pleaded guilty in 2008 to soliciting prostitution, including of minors, and served 13 months in the county jail. At the time, one JPMorgan employee wrote in an email that Epstein’s estimated $120 million with the bank would leave this year “because I can’t imagine that it will last (waiting for Dimon’s review)”.
JPMorgan said the bank “did not find the records, nor did they [Dimon] remember, that review”.
Support Epstein
As far back as 2008, court filings show the key role Staley allegedly played in protecting Epstein’s relationship with JPMorgan.
Staley, a 66-year-old American who worked at JPMorgan for more than 30 years until 2013, developed a relationship with Epstein when he was an executive in its asset management operation. Staley later opened the JPMorgan investment bank.
Staley is alleged in the filings to have been involved in the 2008 decision to keep Epstein’s account, along with Stephen Cutler, who was then JPMorgan’s general counsel.
Cutler was also included in at least one “rapid response meeting” regarding new information about Epstein’s human trafficking, the document revealed.
Cutler, who left JPMorgan in 2018, is another potential witness in the case. He did not respond to a request for comment.
Attorneys for Staley, who is not a defendant in the case, declined to comment.
In 2011, when one of the bank’s compliance directors asked Cutler to approve the Epstein relationship again, Staley’s endorsement was again enough to protect Epstein’s position at JPMorgan.
Despite the new child trafficking allegations against Epstein, JPMorgan concluded that there were “no material updates” and that Staley had “discussed the topic with Jeffrey Epstein who responded that the allegations are false, unsubstantiated and do not anticipate problems”.
Just a few weeks after Epstein’s new entry in 2011, JPMorgan’s corporate security division signaled another news linking him to child trafficking and abuse of teenage girls.
JPMorgan kept Epstein as a client for two more years, until he was re-signed in 2013. Epstein used his account at JPMorgan to pay off at least 20 of his victims, the Virgin Islands said.
Staley left JPMorgan months before Epstein’s relationship with the bank ended in 2013, joining hedge fund BlueMountain Capital before taking over Barclays in 2015.
The Staley Barclay problem
On the other side of the Atlantic, the revelation of the lawsuit has renewed the Barclays board, especially chairman Nigel Higgins.
Barclays was aware of Staley’s close relationship with Epstein when he was named CEO and required him to disclose his history with sex offenders, according to multiple people involved in the recruitment.
Knowing the potential damage of rolling down the relationship, Barclays has stuck to the line carefully created – both with the regulator and in public statements – that Staley and Epstein have a “close professional relationship” and they are “friendly” outside of work.
But the bank changed its description in 2019, when Britain’s Financial Conduct Authority made new inquiries after other media reports linking the pair and after receiving from US regulators a cache of 1,200 emails. In a letter to the FCA, drafted by general counsel Bob Hoyt, now at HSBC, and signed by Higgins, instead insists the pair do not have a close professional relationship.
This is what led the British regulator to launch a full inquiry into whether Staley had been “complete and honest”: the emails he reviewed were not consistent with a professional relationship, close or not. Barclays declined to comment and an HSBC spokeswoman declined to comment on Hoyt’s name.
In early December 2019, Higgins was summoned with 24 hours’ notice to see Mark Carney, the governor of the Bank of England, Andrew Bailey of the FCA, who has since replaced Carney, and Sam Woods of the Prudential Regulation Authority, the people said.
Supervisors strongly indicated to Higgins they felt Staley’s position was no longer tenable, according to the person briefed on the chair’s report made back to the board. Carney was asked about succession planning and who would take over if he stepped down, the people added.
Barclays spent the next two months – January and February – scrutinizing a large number of emails given to the bank by the FCA, with the help of the law firm Clifford Chance. The law firm conducted interviews and produced a report for the board, which included the most controversial emails in an attachment.
The board’s review remit focused on two questions: whether there was evidence of impropriety and whether Staley was “sufficiently” honest and transparent about his relationship when he joined the bank in 2015 and later in 2019.
The process does not ask the board to make a decision about the appropriateness of his relationship with Epstein in light of the information that has been revealed.
When Staley was interviewed, he said he did not remember what the “Snow White” email was about, a position he still maintains, according to people familiar with his thoughts.
The bank defines the message itself, but about it, there is no evidence and indirect evidence is not relevant. There was no “smoking gun”, one person remembered, and they judged that Staley had been honest. He decided to support her.
Additionally, the board felt that without evidence of what the emails meant, or evidence that Staley knew about Epstein’s crimes, they had no reason to remove the CEO, one of the people said.
However, a person familiar with the email dossier the bank received from the FCA said it did not contain any photographs of the young woman. The bank was also unaware of the timing of the coordinated wire transfer after the email between Staley and Epstein.
For example, the complaint alleges that Staley stayed at Epstein’s Palm Beach, Florida home in early 2009. Around the time of the scheduled visit, “Epstein wired $2,000 from a JPMorgan account to a woman with an eastern European surname,” it said. allegedly.
In late August of that year, the lawsuit alleges Staley told Epstein that he was visiting England. “Epstein asked if Staley needed anything while in London, and Staley said, ‘Yes.’
Without that context, Higgins said the email was out of the question and that the board made a decision without all the available information, people familiar with his thinking said.
“I certainly wouldn’t have put my name on a statement supporting Staley if I saw it,” said one former council member. “Higgins should be asked serious questions about his decision at this point.”