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Richard (RJ) Eskow: While Jamie Dimon Gently Weeps, Another “Big Stick” Bank Attack on Democracy

Richard (RJ) Eskow: While Jamie Dimon Gently Weeps, Another “Big Stick” Bank Attack on Democracy


HuffPO-

He’s at again – and we’re glad. A lot of smart people are dedicating their lives to fighting the corrosive effect of Wall Street on our economy and our democracy, but the best spokesman for that cause comes from Wall Street itself.

JPMorgan Chase CEO Jamie Dimon is still the poster child for today’s morally degraded, self-entitled banker mentality. I don’t know why he keeps talking, but he’s the gift that keeps on giving.

At every major junction in the post-crisis debate about banking, Dimon has stepped in with a perfectly tactless remark that illustrates both the vacuity and the moral corruption of his industry. This week was no exception.

JPM: CSI

Dimon’s own bank is the perfect case study in

[HUFFINGTON POST]

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Joe Nocera: Why People Hate the Banks

Joe Nocera: Why People Hate the Banks


NYT-

A few months ago, I was standing in a crowded elevator when Jamie Dimon, the chief executive of JPMorgan Chase, stepped in. When he saw me, he said in a voice loud enough for everyone to hear: “Why does The New York Times hate the banks?”

It’s not The New York Times, Mr. Dimon. It really isn’t. It’s the country that hates the banks these days. If you want to understand why, I would direct your attention to the bible of your industry, The American Banker. On Monday, it published the third part in its depressing — and infuriating — series on credit card debt collection practices.

You can’t read the series without wondering whether banks have learned anything from the foreclosure crisis, which

[NEW YORK TIMES]

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JPMorgan Chase Facing Massive PLS Buyback Claims

JPMorgan Chase Facing Massive PLS Buyback Claims


National Mortgage News-

JPMorgan Chase & Co.’s chief executive, Jamie Dimon, told investors at the beginning of 2011 that potential repurchases of private-label mortgage securities are “not that material” for his bank — an assertion that increasingly appears to be in doubt.

Dimon might not be quite so confident these days. Gibbs & Bruns LLP, the law firm that negotiated an $8.5 billion mortgage repurchase settlement with Bank of America Corp. on behalf of a group of large investors, has announced that it is seeking put-backs on $95 billion in private-label mortgage-backed securities issued by JPMorgan Chase, Washington Mutual Inc. and Bear Stearns. Private-label securities are mortgage-backed securities or other bonds that are created and sold by companies other than government-sponsored entities like Fannie Mae and Freddie Mac.

[NATIONAL MORTGAGE NEWS]

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The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve


The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

U.S. Senator Bernie Sanders (I-Vt.)
Washington, DC
October 19, 2011

[ipaper docId=69476603 access_key=key-26etn7unk59fdnkzkrp7 height=600 width=600 /]

 

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GAO Finds Serious Conflicts at the Fed: Jamie Dimon was on the board of the NY Fed while his bank received loans from the Fed Reserve.

GAO Finds Serious Conflicts at the Fed: Jamie Dimon was on the board of the NY Fed while his bank received loans from the Fed Reserve.


Excerpt via Senator Sanders-

The report by the non-partisan research arm of Congress did not name but unambiguously described several individual cases involving Fed directors that created the appearance of a conflict of interest, including:

  • Stephen Friedman In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans. During the same period, Friedman, chairman of the New York Fed, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed’s rules prohibited. He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO.
  • Jeffrey Immelt The Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility. The Fed later provided $16 billion in financing for GE under the emergency lending program while Immelt, GE’s CEO, served as a director on the board of the Federal Reserve Bank of New York.
  • Jamie Dimon The CEO of JP Morgan Chase served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns.At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.
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MUST SEE | Dylan Ratigan, Author David DeGraw and Prof. William Black on Corruption & OWS Movement

MUST SEE | Dylan Ratigan, Author David DeGraw and Prof. William Black on Corruption & OWS Movement


Hijacking protests for political gain

October 17, 2011

Author David DeGraw and Prof. William Black talk about the politicians supporting the OWS movement for their own political gain as opposed to those who truly believe in the protests.

[DYLAN RATIGAN]

 

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JPMC isn’t alone “Donating” to NYPD! Bank of America, Barclays Capital, Goldman Sachs… others did also! #occupywallstreet #OWS

JPMC isn’t alone “Donating” to NYPD! Bank of America, Barclays Capital, Goldman Sachs… others did also! #occupywallstreet #OWS


Almost a week ago,Quelle Surprise! “J.P. Morgan Chase “donates” $4.6 Million to NYPD” was posted up and went madly viral, as it turns out they aren’t alone.

Salon has just reported that

As it turns out, JPMorgan is not the only financial institution that has been generous to the police foundation. In the 2009-10 year, Goldman Sachs, Barclays Capital, investment bank Jeffries and Co., investor Carl Icahn, and investment firm The Renco Group each gave over $100,000 to the foundation, putting them in the top-tier of donors, according to the foundation’s website. Bank of America also gave over $75,000 that year. (Another $100,000+ donor was Rupert Murdoch’s News Corp.)

Keep in mind that’s just a single year’s worth of donations. As a private non-profit, the New York City Police Foundation does not have to release detailed donor information, so we don’t know of the the full scope of Wall Street money flowing into the NYPD.

Sound Off!

 

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JPMorgan Chase & Co. has invested in a fund that has bought about $400 million in Twitter Inc.

JPMorgan Chase & Co. has invested in a fund that has bought about $400 million in Twitter Inc.


Perfect Timing Don’t You think? Just earlier today “J.P. Morgan Chase “donates” $4.6 Million to NYPD” #OccupyWallStreet


Bloomberg-

JPMorgan Chase & Co. has invested in a fund that has bought about $400 million in Twitter Inc. shares, valuing the blogging service at as much as $4.5 billion, three people with knowledge of the matter said.

The fund, which has more than $1 billion, is being run by Twitter investor Chris Sacca, said two of the people, who declined to be identified because the arrangement isn’t public. JPMorgan is committing the bulk of the financing for the fund, the people said.

[BLOOMBERG]

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Quelle Surprise! “J.P. Morgan Chase “donates” $4.6 Million to NYPD” #OccupyWallStreet

Quelle Surprise! “J.P. Morgan Chase “donates” $4.6 Million to NYPD” #OccupyWallStreet


UPDATE: JPMC isn’t alone “Donating” to NYPD, Bank of America, Barclays Capital, Goldman Sachs… others did also!

H/T Eric Allen Bell

JPMorgan Chase recently donated an unprecedented $4.6 million to the New York City Police Foundation. The gift was the largest in the history of the foundation and will enable the New York City Police Department to strengthen security in the Big Apple. The money will pay for 1,000 new patrol car laptops, as well as security monitoring software in the NYPD’s main data center.

New York City Police Commissioner Raymond Kelly sent CEO and Chairman Jamie Dimon a note expressing “profound gratitude” for the company’s donation.

“These officers put their lives on the line every day to keep us safe,” Dimon said. “We’re incredibly proud to help them build this program and let them know how much we value their hard work.”

[JPMORGAN CHASE CORPORATE]

Hackers leak data of JPMorgan Chase CEO James Dimon

&

JPMorgan Chase & Co. has invested in a fund that has bought about $400 million in Twitter Inc.

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Hackers leak data of JPMorgan Chase CEO James Dimon

Hackers leak data of JPMorgan Chase CEO James Dimon


Hackers today released personal information for JPMorgan Chase Chief Executive Officer James Dimon.

The document titled DOX THE BANKER: James Dimon, posted to the Pastebin Web site, includes the CEO’s age, recent addresses, contributions, details of litigation he has been involved in, as well as registration information for businesses, but no sensitive information such as financial data.

A twitter account “CabinCr3w” took credit for the data leak.

Just yesterday the same group leaked Goldman Sachs CEO Lloyd Blankfeins personal data revealing the same info but since has been deleted.
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Dimon: ’Everybody Is Going to Sue’ Over Mortgages

Dimon: ’Everybody Is Going to Sue’ Over Mortgages


Bloomberg-

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.

“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

[BLOOMBERG]

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Ambac Assur. UK Ltd. v J.P. Morgan Inv. Mgt., Inc. | NY APPEALS COURT REVERSED “Jamie Dimon, the subprime securities market “could go up in smoke”

Ambac Assur. UK Ltd. v J.P. Morgan Inv. Mgt., Inc. | NY APPEALS COURT REVERSED “Jamie Dimon, the subprime securities market “could go up in smoke”


Decided on July 14, 2011

SUPREME COURT, APPELLATE DIVISION

First Judicial Department
David B. Saxe, J.P.
James M. Catterson
Rolando T. Acosta
Sheila Abdus-Salaam
Nelson S. Román, JJ.
Index 650259/09
5034


[*1]Ambac Assurance UK Limited, etc., Plaintiff-Appellant,

v

J.P. Morgan Investment Management, Inc., Defendant-Respondent.


Plaintiff appeals from an order of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered March 25, 2010, which granted defendant’s motion to dismiss the complaint.

Shapiro Forman Allen & Sava LLP, New York
(Michael I. Allen and Yoram Miller
of counsel), for appellant.
Paul, Weiss, Rifkind, Wharton & Garrison LLP, New
York (Richard A. Rosen,
John F. Baughman, Farrah R.
Berse and Jennifer K.
Vakiener of counsel), for
respondent.

CATTERSON, J.

In this breach of contract action, the plaintiff seeks to recover damages for the loss of [*2]more than $1 billion from investment accounts created to fund notes it guaranteed. The plaintiff alleges that the defendant, investment manager J.P. Morgan Investment Management Inc., failed to manage the accounts. Instead, defendant continued to hold toxic subprime securities in the accounts while its corporate parent, J.P. Morgan Chase, reduced its exposure to the same type of securities based on its knowledge that they “could go up in smoke.”

We are asked to determine if the plaintiff’s allegations are sufficient to survive a CPLR 3211 motion to dismiss where the plaintiff concedes that the defendant adhered to the contractual limitations on purchasing subprime securities.

The undisputed facts of the case are as follows: The plaintiff, Ambac Assured U.K., guaranteed timely payment of principal and interest for certain notes issued by Ballantyne, a special purpose vehicle established to reinsure term life insurance policies. To capitalize itself and finance the required reserves, Ballantyne issued more than $2 billion in securities.

On May 2, 2006, Ballantyne and the defendant entered into an investment management agreement (hereinafter referred to as the “IMA”) pursuant to which defendant agreed to act as the investment advisor for $1.65 billion of the proceeds raised by Ballantyne via its sale of the notes [FN1]. Pursuant to the IMA, Ballantyne opened two accounts: the Reinsurance Trust Account and the Pre-Funded Account over which the defendant had full investment authority subject to the investment guidelines.

The guidelines state that the goal of the investment policy “is to obtain reasonable income while providing a high level of safety of capital” (emphasis added). They identify the nature, quality and diversification requirements of the investments and contain specific limitations for investments on the basis of sectors and ratings.

The guidelines set forth the percentage of account assets which could be invested in each class and sector. Accordingly, permitted securities included home equity loan asset-backed securities (hereinafter referred to as “HELOS”) and mortgage-backed securities like Alt-A’s (hereinafter referred to as “MBS”). These securities required ratings of “A” through “AAA,” and could not exceed percentages of 60% and 50% of the accounts, respectively.

The IMA also contains a “Discharge of Liability” provision which states that the defendant does not guarantee the future performance of the accounts or any specific level of performance. It further states that the defendant shall have no liability for any losses “except to the extent such [l]osses are judicially determined to be proximately caused by the gross negligence or willful misconduct of [defendant] (emphasis added).” While the IMA is governed by New York law, it further requires that investments be made in compliance with Chapter 13 of the Delaware Insurance Code.

As of May 2006, the defendant began purchasing securities for the accounts. The record reflects that as of January 2007, approximately 30% of the assets in each account was invested in [*3]MBS, and approximately 59% of assets in both accounts was invested in HELOS. Subsequently, the accounts began sustaining losses. On December 28, 2007, after the accounts suffered significant losses, the guidelines were modified to require the defendant to seek approval from Ballantyne and the plaintiff before buying or selling assets for the accounts. The amended guidelines contained the same investment goal as the original guidelines, namely, obtaining “reasonable income while providing a high level of safety of capital.”

Approximately, one year later, in October 2008, Ballantyne terminated the defendant as its investment advisor. By this time, the accounts allegedly had lost $1 billion of the $1.65 billion entrusted to the defendant just 30 months earlier.
Ballantyne subsequently failed to make scheduled payments under the notes, and the plaintiff’s guarantees were called upon.

In or about June 2009, the plaintiff commenced this action on behalf of Ballantyne seeking damages arising from the defendant’s alleged breaches of the IMA, and of Chapter 13 of the Delaware Insurance Code. The plaintiff also alleges a breach of fiduciary duty, and a tort cause of action in gross negligence.

The plaintiff’s allegations stem from an article in Fortune magazine, published in September 2008 in which J.P. Morgan Chase CEO, Jamie Dimon, was quoted as having concluded as early as October 2006 that the subprime securities market “could go up in smoke.” He was further described as having instructed his subordinates to “watch out for subprime,” directing the head of securitized products to “sell a lot of our positions.” Shawn Tully, Fortune, Jamie Dimon’s Swat Team, How J.P. Morgan’s CEO and his crew are helping the big bank beat the credit crunch, September 2, 2008.[FN2]

The plaintiff alleges that the defendant continued to purchase and hold such subprime securities as the HELOS and MBS in Ballantyne’s accounts even after J.P. Morgan Chase had “evidence about the growing risk of collapse of the [s]ubprime [s]ecurities market.”[FN3] Hence, the plaintiff alleges that the defendant breached the agreement by failing to manage the accounts in [*4]accordance with the stated objective of seeking a “reasonable income and a high level of safety of capital.”

The defendant made a pre-answer motion to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7). It argued, inter alia, that the breach of contract claim should be dismissed because the defendant had complied with the guidelines, and did not act with gross negligence or willful misconduct or violate the Delaware Insurance Code. The defendant further argued that Dimon’s statements, as reported in Fortune, did not concern the type of securities at issue here. It also argued that the tort claims were pre-empted by the Martin Act.[FN4]

The court granted the motion dismissing the complaint, and noted, inter alia, that the plaintiff had conceded that the defendant had not exceeded the percentage limitations contained in the guidelines. The court, relying on our determination in Guerrand-Hermès v Morgan & Co. (2 AD3d 235, 769 N.Y.S.2d 240 (1st Dept. 2003), lv. denied, 2 NY3d 707, 781 N.Y.S.2d 288, 814 N.E.2d 460 (2004)), held that “[m]erely alleging failure to pursue an investment objective, where defendant actually followed the specific diversification requirements contained in the Guidelines that were intended to implement that objective, is not sufficient to set forth a claim for breach of contract.”

The court further found that statements made by Dimon concerning the market, as reported in Fortune and MarketWatch articles, referred to collateralized debt obligations (CDOs) and mortgage lending, and did not concern the type of mortgage-backed securities at issue here.

We now reverse and reinstate the complaint in its entirety. We find that, at this stage of the pleadings the motion court should have accepted the plaintiff’s allegations as true, given the plaintiff the benefit of every possible inference, and simply ascertained whether plaintiff’s allegations evidenced a cognizable cause of action. See Assured Guar.(UK) Ltd. v. J.P. Morgan Inv. Mgt. Inc., 80 AD3d 293, 915 N.Y.S.2d 7 (1st Dept. 2010), lv. granted, N.Y. Slip Op. 64361[u] (1st Dept. 2011), supra, citing Samiento v. World Yacht Inc., 10 NY3d 70, 79, 854 N.Y.S.2d 83, 87, 883 N.E.2d 990, 994 (2008). For the reasons set forth below, we further find that the motion court erred in failing to conclude that the plaintiff’s allegations are sufficient to sustain a breach of contract claim.

As a threshold matter, we reject the motion court’s observation that the basis for the plaintiff’s allegations, namely, CEO Dimon’s statements in Fortune did not concern the type of securities held in the subject accounts. For the same reasons, we also reject the defendant’s [*5]reiteration, on appeal, that the articles are not evidence of the defendant’s knowledge about the subject securities because the securities referred to in the article are SIVs and CDOs which were never purchased for the accounts.

We are not required to determine at this stage if, at the time of the events described in the complaint, there was a distinction for investment purposes between the Dimon-referenced CDOs (the underlying value of which was based on subprime mortgages)[FN5] and the securities in the subject accounts which were home equity loan asset-backed securities and mortgage-backed securities allegedly also comprised of subprime loans. As the plaintiff asserts, and as the articles in the record establish, Dimon’s concern embraced the entire mortgage market, including mortgage lending and mortgage products. Particularly relevant is the following excerpt from Fortune :

“One red flag came from the mortgage servicing business… [I]n October 2006, the chief of servicing said that late payments on subprime loans were rising at an alarming rate. The data showed that loans originated by competitors like First Franklin and American Home were performing three times worse than J.P. Morgan’s subprime mortgages. We concluded that underwriting standards were deteriorating across the industry’ says Dimon.”

This, the article states, led to his team “mostly exiting the business of securitizing subprime mortgages” with the result that in late 2006, J.P. Morgan Chase “started slashing its holdings of subprime debt. It sold more than $12 billion in subprime mortgages that it had originated.”

The plaintiff’s breach of contract claim rests on the allegation that while J.P. Morgan was actively divesting itself of the risky subprime mortgages it had originated, the defendant was doing nothing about riskier subprime mortgages originated by others and held in the subject accounts [FN6]. In other words, that the defendant continued to invest in securities which it knew were [*6]entirely incompatible with plaintiff’s investment objective and stated goal to “obtain reasonable income while providing a high level of safety of capital.”

Precedent, therefore would appear to mandate a finding that the plaintiff, at the very least, has sufficiently alleged gross negligence as a basis for its breach of contract claim. See Assured Guar. (U.K.) Ltd. v. J.P. Morgan Inv. Mgt. Inc., 80 AD3d at 305, 915 N.Y.S.2d at 16 (plaintiff’s stated goal was “reasonable income while providing a high level of safety of capital”, but defendant invested “substantially all” of the assets in subprime securities which it knew were risky), citing Colnaghi, U.S.A. v. Jewelers Protection Servs., 81 N.Y.2d 821, 823-824, 595 N.Y.S.2d 381, 383, 611 N.E.2d 282, 284 (1993) (gross negligence consists of conduct that evinces a reckless disregard for the rights of others or smacks’ of intentional wrongdoing”).

This is entirely consistent with our holding in Assured. The defendant in this case misapprehends our holding by relying merely on the decretal paragraph in Assured [FN7]. The defendant thus argues that Assured mandates dismissal of a breach of contract claim where an investment manager has discretionary authority, and is in compliance with the contractual diversification requirements.

This is error. The omission in the decretal paragraph is not reflective of the holding. In Assured, we simply did not address the issue that the defendant raises here, viz., that compliance with the sector and ratings limitation provision forecloses a breach of contract action. To the extent that it was silent as to this argument, no principle was enunciated.

Nor does our ruling in CMMF, LLC v. J.P. Morgan Inv. Mgt. Inc. (78 AD3d 562, 915 N.Y.S.2d 2 (2010)) help the defendant as to this issue. In that case, this Court sustained a breach of contract cause of action on the basis of the plaintiff’s allegations that the defendant breached the sector and ratings limitations provision of the agreement. CMMF, 78 AD3d at 563, 915 N.Y.S.2d at 5. That determination, however, does not stand for the proposition that the provision must be allegedly violated in order for a plaintiff’s breach of contract claim to survive. [*7]It simply means, the Court did not need to reach the issue we are now asked to determine.

Here, the defendant asserts — and the plaintiff concedes — that the subject subprime securities did not exceed the percentages set forth in the agreement — even after the guidelines were amended. Thus, contends the defendant, the motion court properly dismissed the breach of contract claim finding that defendant had followed the “specific diversification requirements.”

Notwithstanding its concession, the plaintiff asserts that the motion court erred in its ruling because it ignored fundamental principles of contract construction. We agree. See e.g. Greenfield v. Philles Records, 98 N.Y.2d 562, 569, 750 N.Y.S.2d 565, 569, 780 N.E.2d 166, 170 (2002)(well established that unambiguous contracts must be interpreted in accordance with their plain meaning); see also Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d 396, 403, 482 N.Y.S.2d 465, 468, 472 N.E.2d 315, 318 (1984); 150 Broadway N.Y. Assoc. L.P. v. Bodner, 14 AD3d 1, 6, 784 N.Y.S.2d 63, 66 (1st Dept. 2004) (contracts must be construed to “avoid an interpretation that would leave contractual clauses meaningless”) (internal quotation marks and citations omitted).

In this case, the motion court overlooked the plain meaning of the IMA by misreading the limitations provision as a requirements provision. Indeed, the defendant’s argument that the accounts, at any one time, did not hold more than the 50 to 60% of subprime Alt-A mortgage securities as permitted by the IMA suggests that the distinction between “limitation” and “requirement” still eludes the defendant.

The plain meaning of “limitations” connotes a point beyond which a party may not proceed. It is not a target that a party is obligated to meet which would instead constitute a “requirement.” Accordingly, any reliance by the motion court or defendant on our determination to dismiss the breach of contract claim in Guerrand-Hermes v. Morgan & Co. (2 AD3d 235, 769 N.Y.S.2d 240 (2003), supra) is misplaced. The facts and contract language are distinguishable. In that case, there were, indeed, specific “investment guidelines diversification requirements” that were intended to implement the objective. Guerrand-Hermes, 2 AD3d at 238, 769 N.Y.S.2d at 244. The investment management agreement provided, inter alia, that $18 million was to be invested in a leveraged portfolio of emerging market debt securities. Moreover, the plaintiff acknowledged that he understood there were risks associated with investing in emerging markets, and that investment in such markets “can lead to losses of principal, including all of the $18 million equity invested, or more.” 2 AD3d at 236, 769 N.Y.S.2d at 241.

In this case, there were no specific requirements as to investing in any particular types of securities. Certainly, there was no warning or any acknowledgement that all assets could be lost. The diversification provision listed HELOS and Alt-A’s as securities in which the defendant was permitted to invest, up to certain percentage limits of the account assets. However, the diversification provision did not require the defendant to invest in them at all.

The plaintiff asserts therefore, that adhering to the maximum contractually permitted percentages despite “seismic changes to the economy, to world markets and J.P. Morgan’s own internal conclusion[s] [about an impending financial meltdown in the housing market],” suggests the very opposite of managing the accounts and exercising discretion as to whether the securities should be held at all. We agree. [*8]

Action or non-action in accordance with a provision that limits rather than mandates certain actions does not immunize defendant from a breach of contract claim when that action/non-action is egregiously at odds with the stated contractual requirement that defendant pursue the investment objective of reasonable income and high level of safety of capital. As the plaintiff correctly asserts, the motion court’s holding that there was no breach of agreement so long as the defendant did not exceed the maximums stated in the sector and ratings provisions would allow the defendant to insulate itself from liability by closing its eyes to known risks, and so would render the contract’s stated goal of “a high level of safety of capital” impermissibly meaningless. See e.g. Two Guys From Harrison-N.Y., 63 N.Y.2d at 403, 482 N.Y.S.2d at 468.

Contrary to the defendant’s argument, plaintiff’s claim is not based on the allegation of failure to achieve — no matter how strenuously the defendant attempts to recast the allegations so that it can then cite to precedent mandating dismissal of the complaint on such basis. See CMMF, LLC, 78 AD3d at 563, 915 N.Y.S.2d at 5 (no breach of contract claim may be sustained based on a failure to achieve an investment objective where investment manager has discretionary authority), citing Vladimir v. Cowperthwait, 42 AD3d 413, 839 N.Y.S.2d 761 (1st Dept. 2007). That the defendant failed to achieve the goal of reasonable income and high safety of capital is undisputed, as is the foreclosure of plaintiff’s pursuit of a claim on that basis. See CMMF, LLC, at 563, 915 N.Y.S.2d at 5. Here, however, the plaintiff’s claim rests on the allegations that, notwithstanding its adherence to certain limitations, the defendant failed to manage the accounts in accordance with the agreed upon objective. Had it done so, plaintiff asserts, it might have followed the path taken by JP Morgan Chase to divest itself of securities based on subprime mortgages before the losses turned catastrophic.[FN8] Instead, as the defendant concedes, the accounts were for the most part invested by January 2007, “with minimal subsequent account activity” until Ballantyne closed the accounts almost two years later. As such the plaintiff’s allegations are sufficient to sustain a breach of contract claim. See Sergeants Benevolent Assn. Annuity Fund v. Renck, 2004 WL 5278824 (Sup. Ct, N.Y. County 2004)(plaintiffs’ breach of contract claim upheld against defendant investment brokerage on allegations that defendant would not have lost $27 million had it pursued the conservative investment plan required by the contract), rev’d on other grounds, 19 AD3d 107, 796 N.Y.S.2d 77 (1st Dept 2005); see also Scalp & Blade v. Advest, Inc., 281 AD2d 882, 883 [4th Dept 2001].

We reject the defendant’s contention that Sergeants Benevolent Assn. Annuity Fund is [*9]distinguishable. The defendant argues that, in that case, defendant breached the agreement to pursue “conservative capital appreciation” by investing in highly volatile, risky tech, communications and internet stocks which were not permitted by any provision of the contract. We find this argument unpersuasive for the reasons already stated above. Whether permitted or not, once the defendant acquired information about the riskiness of subprime securities it was also aware that such securities were incompatible with the stated investment objective of the accounts.

The plaintiff has also sufficiently alleged that defendant breached the Delaware Insurance Code. 18 Del C. § 1305(4) provides: “An insurer shall not at any [one] time have more than 50% of its assets invested in obligations under § 1323 of this title, exclusive of that portion of such obligations guaranteed or insured by an agency of the United States government.” Obligations under § 1323(a) are “bonds, notes or other evidences of indebtedness secured by first or second mortgages,” and are not limited to individual mortgages. Therefore, section 1323 covers more than 50% of the securities contained in the accounts. See Assured, 80 AD3d at 305, 915 N.Y.S.2d at 16.

We further reject the defendant’s argument that it complied with § 1308 of the Delaware Code, and that compliance with any section is sufficient to render an investment compliant with the Code. The defendant maintains that the securities at issue met the requirements contained in § 1308, as they were all rated “A” or higher by Standard and Poor’s, or “A2″ or higher by Moody’s at the time of purchase. However, the statements of record only reflect holdings in the accounts as of two dates, May 31, 2006 and January 31, 2007, and do not, on their face, establish any regulatory compliance. Thus, defendant has failed to demonstrate conclusively, through documentary evidence, that it complied with this section.

The defendant has not established entitlement to dismissal of plaintiff’s claims as time-barred. Section 7(d) of the IMA provided that the plaintiff was obligated to “object in writing” as “to any act or transaction […] within a period of ninety (90) days from the date of receipt of any statement” from the defendant. The holding in Assured is not applicable here since the plaintiff did not initially assert that the amended guidelines (in writing) constituted an objection as they did in Assured (80 AD3d at 304, 915 N.Y.S.2d at 15); nor does the record reflect that Ballantyne made a prior oral objection that resulted in the amended guidelines. In any event, whereas the amended guidelines in Assured restricted the defendant making future investments in cash equivalents, no such restriction applied here, but on the contrary included the list of the permitted securities.

However, as the motion court correctly noted, the plaintiff’s claims are based on defendant’s failure to manage the accounts in accordance with the investment objective rather than upon any specific act or transaction. Hence, they are based on conduct that would not have shown on any statement, namely, that defendant failed to follow a course of action with respect to the accounts despite its awareness of the declining subprime securities market and its own divestiture of such securities. Such knowledge, which is the cornerstone of the plaintiff’s allegations, is not a fact which would be evident in the statements. Thus, the defendant has not established entitlement to pre-answer dismissal on the ground that the action is time-barred. [*10]

Finally, assuming, arguendo, that the appeal pending in the Court of Appeals affirms this Court’s finding that plaintiff’s tort claims for gross negligence and breach of fiduciary duty are not preempted by New York General Business Law § 352 et seq. (the Martin Act), we find that neither are they duplicative of the breach of contract claim. See Assured, 80 AD3d at 306, 915 N.Y.S.2d at 17.

Accordingly, the order of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered March 25, 2010, which granted defendant’s motion to dismiss the complaint, should be reversed, on the law, with costs, and the motion denied.

All concur.


Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered March 25, 2010, reversed, on the law, with costs, and the motion to dismiss the complaint denied.

Opinion by Catterson, J. All concur.
Saxe, J.P., Catterson, Acosta, Abdus-Salaam, Román, JJ.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JULY 14, 2011

DEPUTY CLERK

Footnotes

Footnote 1:Plaintiff is a third-party beneficiary of the IMA and is entitled to enforce Ballantyne’s rights thereunder.

Footnote 2: The article states that “J.P. Morgan mostly exited the business of securitizing subprime mortgages when it was still booming, shunning now notorious instruments such as SIVs (structured investment vehicles) and CDOs (collateralized debt obligations).”

Footnote 3:The article also indicates that any information available to J.P. Morgan Chase would have been made available to its affiliates. It states: “The Dimon team…mine every part of the business for detailed information – especially data that point to trouble – then share it at warp speed throughout the corporation.”

Footnote 4:This issue is not argued by the parties on appeal in light of this Court’s decisions in Assured Guar. (U.K.) Ltd. v. J.P. Morgan Inv. Mgt. Inc., 80 AD3d 293, 915 N.Y.S.2d 7 (1st Dept. 2010), lv. granted, N.Y. Slip Op. 64361[u](1st Dept. 2011) and CMMF, LLC v. J.P. Morgan Inv. Mgt. Inc., 78 AD3d 562, 915 N.Y.S.2d 2 (1st Dept. 2010), but defendant reserved its right to so argue, if appropriate, following consideration of the issue by the Court of Appeals.

Footnote 5:A fact established in the record by defendant’s exhibit, an article titled, “Turmoil in the Financial Markets,” which states as follows: “The credit crisis arose from losses in mortgage loans… Many of these loans were subprime’ loans… Mortgage originators sold the home loan mortgages to others, including off balance sheet entities created by investment banks. These entities issued structured notes called collateralized debit [sic] obligation[s] (CDOs), secured by groups of home mortgage loans.”

Footnote 6:These apparently included — as reflected in the record though not noted by the plaintiff — mortgages originated by the above-named competitor First Franklin, whose defaults were apparently known to J.P. Morgan Chase in October 2006 to be three times worse than its own, but which were still being held for the accounts at the time of amended guidelines in December 2007.

Footnote 7:Compare Assured, 80 AD3d at 305, 915 N.Y.S.2d at 16 (plaintiff’s contract claim sufficiently alleges gross negligence to survive a motion to dismiss) with Assured, 80 AD3d at 306, 915 N.Y.S.2d at 17 (order “should be modified […] to reinstate the contract claims based on alleged violation of Delaware Insurance Code Chapter 13 that accrued on or after June 26, 2007, as well as its claims for breach of fiduciary duty and gross negligence […]and otherwise affirmed).

Footnote 8:At oral argument, defendant argued that management of the accounts included its assessment of whether to sell, or whether securities would regain their value. For purposes of the defendant’s motion to dismiss, we reject that theory of management in view of the plaintiff’s allegations that J.P. Morgan’s concerns in October 2006 led to it divesting itself of similar securities when subprime securities were still being held in the subject accounts 15 months later.

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I’M SORRY | Dimon’s Annual Meeting Brings Mortgage Apology

I’M SORRY | Dimon’s Annual Meeting Brings Mortgage Apology


NOT…

“We are doing everything we can to keep people in their homes that should stay in their homes.”

BLOOMBERG-

Jamie Dimon, JPMorgan Chase & Co. (JPM)’s chairman and chief executive officer, said he was sorry for foreclosure mistakes as hundreds of protesters at the annual meeting demanded he do more to help homeowners and small businesses recover from the financial crisis.


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JPMorgan Chase CEO Jamie Dimon’s Letter to Shareholders 4.4.2011

JPMorgan Chase CEO Jamie Dimon’s Letter to Shareholders 4.4.2011


Excerpt:

We do not believe that the Federal Reserve or the Treasury would want to leave American banks at a disadvantage. We need American leadership to be forceful and engaged to ensure a fair outcome.

We all have a vested interest in getting this right The government took great action to stop the crisis from getting worse. Lawmakers and regulators have and will take much action to fix what clearly was a broken system.

[hit image to read pdf]

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Jamie Likes It, The New Consumer Bureau That Is

Jamie Likes It, The New Consumer Bureau That Is


We have to question if this has anything to do with the  White House Considering Sarah Raskin or Jennifer Granholm To Head Consumer Financial Protection Bureau?

From NY Times DealBook

Jamie Dimon, it turns out, has a soft spot for the government’s new consumer financial bureau.

“We need to create a Consumer Financial Protection Bureau that is effective for both consumers and banks,” Mr. Dimon, chief executive of JPMorgan Chase, said in his April 4 letter to shareholders.

Yes, this is the same Mr. Dimon who last month complained that various new rules facing Wall Street “would damage America.” And it is the same JPMorgan that (unsuccessfully) lobbied lawmakers to kill plans for an independent consumer financial agency.


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UNSEALED “Sigma” COMPLAINT | AFTRA Retirement Board Sues JPMorgan Chase

UNSEALED “Sigma” COMPLAINT | AFTRA Retirement Board Sues JPMorgan Chase


“Very Big Money Making Opportunities As The Market Deteriorates”

NYTimes:

In the summer of 2007, as the first tremors of the coming financial crisis were being felt on Wall Street, top executives of JPMorgan Chase were raising red flags about a troubled investment vehicle called Sigma, which was based in London. But the bank chose not to move out $500 million in client assets that it had put into Sigma two months earlier.


[ipaper docId=52816126 access_key=key-2mp3mwbkl12o0ulxjscw height=600 width=600 /]

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Bernie Madoff: JPMorgan Doesn’t Have A Chance In Hell And HSBC And UBS Are Going To “Have Problems”

Bernie Madoff: JPMorgan Doesn’t Have A Chance In Hell And HSBC And UBS Are Going To “Have Problems”


via: Business Insider

Madoff said: “JPMorgan doesn’t have a chance in hell of not coming up with a big settlement.”

“I am not a banker but I know that $100bn going in and out of a bank account is something that should alert you to something.”

“JPMorgan got all the financial statements.”

“There were senior people at the bank who knew what was going on,” he emphasized, without naming anyone. There will be a big interview with Madoff in this weekend’s Financial Times.

continue reading…Business Insider

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JPM’s Dimon says bank will pay for foreclosure errors

JPM’s Dimon says bank will pay for foreclosure errors


Jamie Dimon, chairman and chief executive of J.P. Morgan Chase & Co., says that although the bank didn’t foreclose on people who should’ve been exempted, its mistakes are “embarrassing.”

via CRAIN’S

“Some of the mistakes were egregious, and they’re embarrassing,” Mr. Dimon, 55, said Tuesday at a conference hosted by the Council of Institutional Investors in Washington. He said the bank faces extra legal and regulatory hurdles after a Florida lawsuit uncovered that bank officials had signed foreclosure affidavits without verifying their accuracy.

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GRETCHEN MORGENSON | The Bank Run We Knew So Little About

GRETCHEN MORGENSON | The Bank Run We Knew So Little About


From New York Times

That Aug. 20, Commerzbank of Germany borrowed $350 million at the Fed’s discount window. Two days later, Citigroup, JPMorgan Chase, Bank of America and the Wachovia Corporation each received $500 million. As collateral for all these loans, the banks put up a total of $213 billion in asset-backed securities, commercial loans and residential mortgages, including second liens.

Thus began the bank run that set off the financial crisis of 2008. But unlike other bank runs, this one was invisible to most Americans.

[…]


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BLOOMBERG | JPMorgan Borrowed at Least $5.9 Billion From Fed Discount Window

BLOOMBERG | JPMorgan Borrowed at Least $5.9 Billion From Fed Discount Window


JPMorgan Chase & Co. (JPM), the second- largest U.S. bank by assets, borrowed at least $5.9 billion from the Federal Reserve’s discount window over six months during the height of the financial crisis.

JPMorgan had previously disclosed it borrowed $500 million on Aug. 22, 2007, as similar loans were made to Bank of America Corp. (BAC) and Wachovia Corp. “to display the effectiveness of the facility,” according to a joint statement at the time. JPMorgan accessed the program at least four more times through April 2008, according to documents released today under a Freedom of Information Act request by Bloomberg News and Fox News.

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JAMIE DIMON: Let The Big Dumb Banks Fail

JAMIE DIMON: Let The Big Dumb Banks Fail


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JPMorgan’s Dimon: No mortgage writedowns

JPMorgan’s Dimon: No mortgage writedowns


From CNNMONEY [link]

“Principal writedown for people who could pay their mortgages? Yeah, that’s off the table,” JPMorgan Chase (JPM, Fortune 500) CEO Jamie Dimon said when asked about the idea after an appearance before a U.S. Chamber of Commerce forum in Washington.

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