Better Markets Sues Department of Justice and Eric Holder Over JP Morgan Settlement

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.”

Complaint – Better Markets v. U.S. Department of Justice by BetterMarkets

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  1. Clive

    It’s interesting to compare-and-contrast the eligibility, or “standing” concept in, say, the US to that of the UK. In the UK, with our legal system much less dependent on statutory instruments (although these are of course still very important) and giving wide latitude to judges — with the resultant increase in the weight of case and common law given to such questions — it boils down to the judge’s… err.. judgement as to whether a claimant has standing.

    Note the brevity and simplicity of this:

    Compared to this:

    In the UK, you show up in court, present your outline arguments and the judge hears them before deciding, broadly, if you’re bringing the claim because you think there’s been an injustice or you’re just being vexatious.

    In the US, it seems like you do the above, the judge then has to jump through a load of legal hoops any of which the respondent can challenge if it doesn’t go their way.

    Reading UK judge Lord Diplock’s reasoning (quoted in the Wikipedia link above), you can’t help but think he was aware of the problems that would be caused to “the little people” if they couldn’t lodge a claim by simply presenting some facts and asking a judge does this sound fair to you because it doesn’t to me ?

    1. NotTimothyGeithner

      In theory, the UK judges are paid by the crown which might represent an imperator if we buy Henry VIII’s argumen, but the judges in the UK trace their lineage from the Magna Carta and the requirement the king sends officers to the local courts. When the U.S. was the colonies, the judges were paid by locals if they were paid, and due to a lack of police types, tarring and feathering was a common practice in the New World. The American system developed from the Mayflower Compact, John Smith not tolerating the third sons of the nobility not working in Jamestown*, and the colonial charters which were signed by an effectively absentee king and theoretically all future male, landowners which would mean 40% suffrage. The judges would eventually work directly for the voters and who conned the voters as opposed to the crown.

      On a practical level, having people tar and feather elected governors and judges isn’t really a great thing because they were elected or appointed by elected officials, so there were conscious attempts to keep the old system without the need for violence. The British attempt to pay their appointees and put soldiers in the colonies was seen as a direct challenge to a system Americans loved**.

      Is it fair? No, but the English had non-english speaking monarchs.

      *This is a cool story. When the nobles at Jamestown, they went to deal with John Smith and found him ready and “armed to the teeth.”

      **The American Revolution is fantastic. What would have happened if the British West India Company peddled good tea instead of the crap the Tea Partiers dumped in the harbor?

      1. TomDority

        My answer to ** would be;

        Today is a fantastic mirror of yesterday.

        A tea party is never about the quality of the tea.

        Sure, some party attendees prattle endlessly about the qualities of x. y or tea*
        (‘The tea is the finest, most aromatic, well bodied, hints of fruit and pepper from far fetches unknown, rarest, guaranteed while quantities are available for a limited time tea.’, or, ‘The tea is the roughest, most noxious, ill formed, hints of rot and rodent excrement from below decks, commonest, guaranteed all time garbage tea.’).

        ‘Tea’ party attendees would have chucked any tea into the stew, in effort, to affront the tyranny of economic rent seekers…… (er, I meant to say) to affront kings, oligarchs, kleptobrats, party poopers and other such ill formed fauna**.

        The only difference between today’s Tea Party and yesterday’s tea party is:
        Yesterday’s Tea Party attendees knew what the party was all about….it certainly was not about the qualities of the tea.

        Today’s Tea Party attendees believe the party is about the quality of tea and, would benefit from thrusting themselves into the stew.

        * I am guilty, on occasion, of prattling on about x,y or tea.

        ** I do not know the environmental condition of the Boston Harbor. The use of the word ‘stew’ does not imply the Boston Harbor is a polluted cesspool or cistern although, it may be.

        Note: The environmental condition of today’s plutos, oligs, kleptos and kings (tyrants all) is a stew. The stew is the roughest, most noxious, ill formed, hints of rot and rodent excrement from below decks, commonest, guaranteed all time garbage stew. It is a polluted cesspool or cistern.

  2. ArkansasAngie

    Without knowing the crime, you don’t know who has been hurt.

    This Administration doesn’t need the judiciary.
    It doesn’t need Congress.
    The imperial presidency?
    Is there really any difference between Obama and Bush?

    My answer is no.

    Throw the bums out. All of them. A one-eyed drunken sailor would be better. Lesser of two evil? Nope.

    1. Tyler

      I definitely understand your frustration, but I don’t think we should fire all of them. I think the members of the Congressional Progressive Caucus should keep their jobs.

      1. NotTimothyGeithner

        Why? Has the Congressional Progressive Caucus written a letter explaining why they disagree with some hideous policy before they vote for it?

  3. Banger

    This is a good thing and the implications of this suit should begin to help more people to understand that both major political parties are completely corrupt and have only a minimal interest in justice or the welfare of the society as a whole.

    It will likely go nowhere since, in the U.S., we not only have a hopelessly corrupt political system but a hopelessly corrupt justice system that once was a bit of a counterforce to the oligarchs but now is no longer has morphed to yet another method of oppression at almost every level when it comes to class interests of the rich.

    1. Clive

      I agree Banger. The judiciary is the last line of defence against the onset of tyranny; once that’s gone (and while I don’t know the situation in the US first-hand, I get the sense that it’s going), it’s game over.

      1. allcoppedout

        UK law has more or less had it. We have lots of apparent means to get in front of a judge but our courts turn out to be for the rich only. Costs are massive and legal aid non-existent. Both UK and USA rate very low on access to justice amongst developed nations. Banger would be double right here.

  4. steelhead23

    As regards BM’s standing to bring this action, wouldn’t ownership of as little as one U.S. Dollar be sufficient to demonstrate injury? You see, JPM is a primary dealer. It has been declared to be systemically important to the global financial system. Thus, virtually everyone has a vested interest in the efficacy of this “deal”.

    Failing that, BM could purchase a single share of JPM and argue that without full and complete disclosure, it is not possible to determine the settlement’s likely effects on the value of that share and uncertainty has a very real cost.

    Yeah, I’m no juris doctorate, but I really, really, really want this case to go forward. Sunshine is a great disinfectant.

  5. Doug Terpstra

    Down2long linked to Better Market’s suit late yesterday in links. . Their common-sense arguments are so compelling and free of legalese that it makes me wonder if its not written primarily for fund-raising. If justice-for-all wasn’t just a lonstanding joke, it seems anyone and everyone would have solid standing to be heard, and I know this is cynical, but this will never get past the corp-court gatekeepers.

    Still, it’s good to see it on record, so that when the lampposts are populated and the tumbrels start rolling to the guillotines, no one but the plutocrats will wonder “why do they hate us for our freedom?”

  6. susan the other

    I’m in dreamland! The presiding judge for Better Markets v. JPMC just stopped the civil trial and remanded the whole thing to criminal court due to overwhelming evidence… and also wondering why this can’t be a Qui Tam argument because JPMC in collusion with the DOJ as an accessory to the massive frauds of JPMC is still doing so much harm to our country and our government that damages will be so high they can never be paid… effectively costing more than WW2 to this nation.

    1. steelhead23

      Really?! Links please! The image of Dimon sitting beside Holder in the dock has me hyperventilating.

  7. Sluggeaux

    This suit indeed appears to be guerilla political theater, just as Holder and Dimon’s closed-door good-old-boy-network “settlement” was political theater (which no doubt resulted in Dimon’s recent $20M tip from JPMC’s management-captive board). Our courts will likely find that Better Markets lacks “standing” to bring this suit.

    The real issue here is the complete corruption of the Executive and Legislative Branches and the unwillingness of a news media hell-bent on being “savvy insiders” to call them out.

    See this terrific piece on the “Cult of the Savvy” from HuffPost this past Sunday, and do follow the links to Jay Rosen’s insightful 2011 speech at PressThink and to Emily Guendelsberger’s refreshing resort to actual reporting in the Philly City Paper:

  8. RBHoughton

    I cannot see a problem with Better Market’s standing in the case. They’re just repporting crime as responsible citizens.

    What they are saying in brief is Holder went to Dimon and said “we know what you have done, pay us or we’ll tell the people.”

    1. Yves Smith Post author

      No, that’s not how standing works. Please see Clive’s links at the top of the thread.

      Their claim for standing is that they were damaged by the settlement. That looks to be a stretch.

      1. Sluggeaux

        Correct, Yves. This is a civil suit alleging that the plaintiff has suffered harm. This is not akin to reporting a crime.

        The crime had already been reported. By analogy, every fifth house in the neighborhood has been broken into and the jewels and TV set taken. The burglar has been caught red-handed with his garage full of other people’s jewelry and TV’s.

        Instead of making an arrest and haling the burglar before the local magistrate, the police chief and the burglar got together behind closed doors and negotiated how many Saturdays it might be convenient for the burglar to come and pick up trash by the roadside in front of the police station in exchange for some jewelry and a few TV’s for the police chief and the mayor. The police chief then called a press conference and announced that the burglar was being “punished” for his wrongdoing, while he, the mayor, and the burglar kept all the jewelry and TV sets for themselves.

        The mayor and the city council need to fire the police chief — but won’t because they are enjoying the jewelry and TV’s that he got for them. There is nothing that the magistrate can do, unless one of the homeowners who was burgled files a lawsuit.

        1. Fíréan

          If one, or more, participant in the markets can break the rules with virtual impunity (i posted previous a website explaining the nature of the settlement) , then all the honest participants in the markets are damaged by both past indiscretions of the guilty parties and on an on-going basis if the honest participants in markets cannot be assured that the guilty will desist, refrain from their illegal actions, no ?

  9. TomDority

    Would love to see this go Qui Tam – it should be made extra special if the harmed individuals could join a class action suit to recover damages – as such, treble damages could, if linked to the Federal Government, force the Government to vitiate all claims against harmed individuals.
    A jubilee anyone? A tea party?
    Fund the future by taxing the economic-rentiers activity……. sorry, got over animated.

    Calling the law…. calling the law…. do you hear me…… I hope they answer.

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