The public interest group Better Markets today filed suit against the Department of Justice and Eric Holder, alleging that the so-called $13 billion settlement that the Federal government entered into with the nation’s biggest bank was improper due to its secrecy and lack of third-party review.
I’ve embedded the filing at the end of this post. Better Markets is seeking an injunction to bar the Department of Justice from enforcing the settlement until the agency submits the settlement to a court to determine whether the pact meets the relevant standards of review.
Here are the guts of the allegations:
6. Yet this contract was the product of negotiations conducted entirely in secret, behind closed doors, in significant part by the Attorney General personally, who directly negotiated with the CEO of JP Morgan Chase, the bank’s “chief negotiator.”…
7. Thus, the Executive Branch, through DOJ, acted as investigator, prosecutor, judge, jury, sentencer, and collector, without any review or approval of its unilateral and largely secret actions….The Executive Branch simply does not have the unilateral power or authority to do so by entering a mere contract with the private entity without any constitutional checks and balances.
8. Notwithstanding such extensive and historic illegal conduct that resulted in a $13 billion payment, the DOJ did not disclose the identity of a single JP Morgan Chase executive, officer, or employee, no matter how involved in or responsible for the illegal conduct. In fact, the DOJ did not even disclose the number of executives, officers, or employees involved in the illegal conduct or if any of them are still executives, officers, or employees of JP Morgan Chase today. Moreover, the DOJ did not disclose the material details of what these individuals did, when or how they did it, or to whom and with what consequences. The DOJ was even silent as to which specific laws were violated, to what degree, and by what conduct. The DOJ also did not disclose even an estimate of the amount of damage JP Morgan Chase’s years of illegal conduct caused or how much money it made or how much money its clients, customers, counterparties, and investors lost. Remarkably, the DOJ does not even clearly state the period for which it is granting JP Morgan Chase immunity…
10. As a result, no one has any ability to determine if the $13 Billion Agreement is fair, adequate, reasonable, and in the public interest or if it is a sweetheart deal entered into behind closed doors that, by design, intent, or effect, let the biggest, most powerful, and wellconnected bank in the U.S. off cheaply and quietly….
11. For example, did JP Morgan Chase settle liability for $100 billion, $200 billion, or more for just $13 billion? Did JP Morgan Chase make $20 billion, $40 billion, or more from its illegal conduct? Should JP Morgan Chase have disgorged $20 billion, $40 billion, or more in ill-gotten gains? Are the same executives, officers, and employees involved in the settled illegal conduct in the same or similar positions of trust and responsibility today, and if so, what measures have been taken to ensure their illegal conduct is not repeated?
12. In addition, why is the $13 billion the only sanction against JP Morgan Chase?
I do have a quibble with the suit repeating the Administration’s misleading characterization of this settlement as being worth $13 billion, since the cash component was less ($9 billion) and the non-monetary items are clearly worth much less and in past settlements, have simply given banks undeserved credit for things they would have done anyhow.
Nevertheless, the filing continues in an energetic, even impassioned vein, to argue that the Department of Justice and Holder have a conflict of interest. Holder and the Administration generally have been the target of intense criticism for their abject failure to hold banks and individuals accountable. Thus they have a vested interest in making the settlement appear to be tough, when it may in fact be anything but. Thus the unprecedented secrecy and the lack of judicial review would be critical to keeping up this pretense. The compliant ticks off the numerous improprieties, such as the DoJ taking a call from, and then a personal meeting with, the top executive of a company that was about to be indicted; the privileged status Dimon enjoys (ready access to other top officials). And it stresses that this conduct even more disturbing since the DoJ has stated that it intends to use this settlement as a template for deals.
The money quote:
The DOJ and the Attorney General have used the settlement amount of $13 billion as a sword and a shield to deflect questions and blind people to the utter lack of meaningful information about their unilateral action and JP Morgan Chase’s illegal conduct…even an unprecedented settlement amount cannot blind justice or immunize the DOJ from having to obtain independent judicial review of its otherwise unilateral, secret actions regarding such historic events.
Now this is all rousing and exciting, but then we get to the likely fly in the ointment, Better Market’s argument regarding their standing to bring this suit:
Plaintiff Better Markets has standing to bring this action because the DOJ’s violations of the Constitution, the APA, and FIRREA have injured and continue to injure Better Markets by undermining its mission objectives; by interfering with its ability to pursue its advocacy activities; by forcing it to devote resources to counteracting the harmful effects of the DOJ’s unlawful settlement process; by depriving Better Markets of the information to which it would have been entitled had the DOJ sought judicial review and approval of the $13 Billion Agreement; and by depriving Better Markets of a judicial forum in which it could seek to participate to influence the settlement process before the agreement becomes effective.
Now perhaps they have stronger arguments they are holding back, but on its face, this is weak tea. If Better Markets can get past summary judgment, they can do discovery, which given the extensive scope of the issues they raise, would be wide-ranging, just the sort of thing the Administration would be keen to squash. But it’s an open question as to whether they can surmount this hurdle. I’m told they think they have a good shot, and I do wish them luck.
But if they fail, it would be a not-surprising reminder of how inequitable our justice system is. As many homeowners know, judges often rejected challenges based on standing when there was clear documentary evidence that the party that was trying to foreclose did not have standing to do so. The brush-off was, basically, “We know you are a deadbeat and quit trying to fool the court.” Yet if you are JP Morgan and the Department of Justice, the shoe is almost certain to be on the other foot and a challenge based on standing will be taken seriously. But it’s still good for Better Markets to take up this against-the-odds fight. If nothing else, it casts well-deserved doubt about the Administration’s claims about the settlement and may elicit some sympathy in the judiciary. Even if it can’t be acted upon in this case, it could come into play in future challenges.
Update: Some useful observations from the Financial Times:
Legal experts say the Better Markets lawsuit may face difficulties given that the DoJ often settles civil matters out of court, which is allowed as long as the settlement is made public. The agency also has broad discretion when it comes to civil cases.
“Better Markets clearly has a strong interest in this issue and the question will be whether its injury is concrete enough to justify a lawsuit in federal court. It’s a tough argument to win,” said Suzanne B. Goldberg, a law professor at Columbia University who specialises in civil procedure. “The burden will be on Better Markets to show that DoJ infringed the organisation’s interest by settling the lawsuit.”