J.P. Morgan banker joked, Madoffs accounting firm might be a car wash

The government paints a damning picture of J.P. Morgan Chase & Co. in its dealings with Bernie Madoff. The $1.7 billion settlement revealed Tuesday portrays bank employees who were alternately too incompetent to notice, or too calculating to bother reporting, that Madoff was running a gigantic Ponzi scheme.

The J.P. Morgan banker assigned to helping Madoff Securities for years had no clue how much money was in the Madoff account, and signed off on compliance reports because he couldn’t see a reason not to, according to the government’s charges.

Others within J.P. Morgan and the predecessor banks later subsumed by J.P. Morgan started raising questions about Madoff beginning in the mid-1990s, and one senior executive joked via email that they should visit Madoff’s accountant’s office to make sure it wasn’t a car wash. Employees then yanked out most of the bank’s own money invested with Madoff-related funds and congratulated themselves after his arrest on the money they’d saved the bank.

The government charged J.P. Morgan with failing to put proper controls in place to prevent and detect money laundering, and cited the bank for not reporting suspicious activity in the Madoff funds to the U.S. government, even though it filed a similar report with U.K. authorities. J.P. Morgan was Madoff Securities’ main bank by the time Madoff was arrested in December 2008, taking in deposits from Madoff’s clients and making loans to Madoff.

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