Source – wallstreetonparade.com
– “…Turns out Jamie Dimon has been taking very good care of the Directors on his Board and they have been taking very good care of Dimon – turning him into a billionaire, notwithstanding the worst criminal record of any major bank in the history of the United States”
For years we’ve been trying to figure out why JPMorgan’s Board of Directors hasn’t sacked its Chairman and CEO, Jamie Dimon, as the bank racked up two felony counts in 2014 for its failure to alert U.S. regulators to glaring red flags in the bank account it held for Bernie Madoff’s Ponzi scheme; one felony count in 2015 for rigging foreign exchange markets; and two more felony counts just last month for rigging the precious metals and U.S. Treasury market. (The bank admitted to all five counts.) In addition, the bank came under another criminal investigation in 2012 and 2013 when it lost $6 billion of its bank depositors’ money gambling in credit derivatives in London (the London Whale scandal).
Turns out Jamie Dimon has been taking very good care of the Directors on his Board and they have been taking very good care of Dimon – turning him into a billionaire, notwithstanding the worst criminal record of any major bank in the history of the United States.
The JPMorgan Chase Board of Directors has a stunning number of incestuous conflicts of interest, few of which have not been properly spelled out to shareholders. Others have never been mentioned to shareholders.
Take the case of Stephen Burke, the current Chairman of NBCUniversal and former CEO of NBCUniversal from 2011 to 2019. Burke has sat on the Board of JPMorgan Chase since 2004 as a fixture on the bank’s Compensation and Management Development Committee which has turned Dimon into a billionaire despite the trail of felony counts, criminal fines and scandals under his “leadership.” Also for the past 16 years, Burke has sat on the Board’s Corporate Governance and Nominating Committee and is currently its Chair.
On September 15 of this year, JPMorgan Chase issued a press release stating that “The Board of Directors of JPMorgan Chase & Co. today announced that the independent directors of the Board have appointed Stephen B. Burke as Lead Independent Director, effective January 1, 2021.”
That announcement came more than a month after the Hollywood Reporter wrote that an SEC filing indicated that Burke was to remain an employee of NBCUniversal’s parent, Comcast, under a five-year contract that runs through the end of 2025, with annual compensation of $350,000. Burke has been an employee of Comcast and/or its subsidiary NBCUniversal, for the entire time he has served on the JPMorgan Chase Board.
JPMorgan Chase’s annual proxy statement for years has revealed only the following conflicts of interest for Burke as they relate to his employer: “extensions of credit and other financial and financial advisory products and services provided to NBCUniversal, LLC and Comcast Corporation”; and “local and digital media placements with NBCUniversal and Comcast outlets; telecom data circuits purchased from Comcast.”
Notice, first of all, that there are no dollar amounts assigned to these conflicts. Is JPMorgan Chase providing a few million dollars in credit to Comcast or tens of billions of dollars? Is it buying a few million dollars in advertising from NBCUniversal and Comcast or does it have a renewable long-term ad contract worth tens of millions of dollars? In other words, just how essential to Comcast’s survival or profit picture is funding from JPMorgan Chase?
We can’t answer the second question but we can answer the first. According to SEC filings, JPMorgan Chase has been a joint book-running manager or a co-manager for tens of billions of dollars of notes offered by Comcast for years, including this year. Comcast is now one of the most indebted companies in the U.S. with $105.7 billion in long-term debt according to Global Finance Magazine,
There are other significant conflicts, beginning with the fact that JPMorgan Chase was involved in creating today’s Comcast, advising the company on the purchase of NBCUniversal in 2011. The deal was consummated by JPMorgan Chase’s rainmaker, Jimmy Lee (who passed away in 2015). According to a report at the time in Institutional Investor, Burke was Chief Operating Officer of Comcast at the time and was personally involved in the negotiations with Lee and JPMorgan Chase.
JPMorgan’s proxy does not reveal the following additional conflicts. JPMorgan Chase owns two Dark Pools that actively trade the stock of Comcast in darkness. (A Dark Pool is, effectively, a thinly regulated stock exchange operated internally by a financial institution. Trading data is reported to the public weeks after the fact and is lumped together for an entire week rather than minute by minute during the trading day so that manipulations could be observed.) According to the Dark Pool data from FINRA, Wall Street’s self-regulator, during the month of March of this year, when stocks of all stripes were tanking, including shares of Comcast, JPMorgan’s two Dark Pools (JPM-X and JPB-X) were actively trading in Comcast shares. For the week of March 23, JPMorgan’s two Dark Pools traded more than 3.4 million shares of Comcast in more than 12,000 trades.
Equally problematic, JPMorgan Chase issues ratings from its stock analysts that move stock prices. For example, a “sell” rating on Comcast could plummet the stock price. According to MarketBeat, JPMorgan Chase has had an “overweight” ranking on Comcast’s stock since October 12, 2018.
There is a fundamental conflict when a bank is allowed to trade a company’s stock in darkness while simultaneously impacting the share price with analyst rating calls issued to the public.
Despite these significant conflicts, for at least the past decade, this statement has appeared in JPMorgan’s annual proxy statement:
“The Board has reviewed the relationships between the Firm and each director and determined that in accordance with the NYSE’s and the Firm’s independence standards, each non-management director…has only immaterial relationships with JPMorgan Chase. Accordingly, all directors other than Mr. Dimon are independent.”
The New York Stock Exchange (NYSE) Listed Company Manual, Section 303A.02, carries this definition and commentary on what constitutes an “independent” director:
“(a) No director qualifies as ‘independent’ unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Commentary: It is not possible to anticipate, or explicitly to provide for, all circumstances that might signal potential conflicts of interest, or that might bear on the materiality of a director’s relationship to a listed company (references to ‘listed company’ would include any parent or subsidiary in a consolidated group with the listed company). Accordingly, it is best that boards making ‘independence’ determinations broadly consider all relevant facts and circumstances. In particular, when assessing the materiality of a director’s relationship with the listed company, the board should consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. However, as the concern is independence from management, the Exchange does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.”
Next, consider this. It’s the Board members themselves who are making the “affirmative determination” that no other board member has a conflict of interest and thus asserting that every member of the bank’s Board, other than Dimon, is pure as the driven snow and can be branded as “independent.”
But here’s what JPMorgan Chase’s own proxy has disclosed for years about the conflicts on the Board:
James Crown is a billionaire investor and Chairman and CEO of Henry Crown and Company, which manages billions of dollars of the Crown family’s wealth. According to a filing with the SEC, as of January 21 of this year, James Crown oversees 12,039,593 shares of JPMorgan Chase stock for partnerships and trusts associated with Henry Crown and Company. At Friday’s closing price of $101.20, that’s a cool $1.2 billion invested in JPMorgan Chase’s stock.
Crown also personally owns outright or in his IRAs, an additional 353,768 shares of JPMorgan Chase stock, or $35.8 million. His spouse and children (via trusts) also own another 70,000 shares according to the January 21 SEC filing.
Despite the five felony counts against JPMorgan Chase while Dimon has sat at the helm, based on wrongdoing that has seriously harmed the investing public and the bank’s long-term reputation, Dimon has consistently produced a rising share price for big investors such as James Crown. Much of that rising share price has been orchestrated through massive share buybacks and generous dividends paid by JPMorgan Chase to shareholders. Bloomberg News reported on June 24 that four large Wall Street banks, which included JPMorgan Chase, since the beginning of 2017 through March of this year, had “returned about $1.26 to shareholders for every $1 they reported in net income.” Bloomberg also reported that in the first three months of this year, JPMorgan Chase paid out more in dividends than its net income.
JPMorgan’s 2020 proxy indicates that the bank is providing “extensions of credit and other financial advisory products and services” to Henry Crown & Company and other Crown family-owned businesses. Again, is the amount of credit in the thousands, or millions or billions of dollars? The proxy is silent on this. In addition, JPMorgan Chase says it is leasing office space from the Crown group of companies, but there is no dollar amount given for these leases or how far out they extend.
Numerous other members of the Board are receiving extensions of credit to their businesses from JPMorgan Chase. The bank’s proxy also notes that it has provided a line of credit to Director Laban Jackson, who has chaired or been a member of the Board’s Audit Committee for years. The proxy is silent on the interest rate charged and the dollar amount of the line of credit. Jackson is retiring from the Board according to the most recent proxy statement.
The proxy statement also reveals that JPMorgan Chase has issued credit cards to seven of its Board members and their immediate family members. Again, no interest rates or dollar amounts are provided.
Until JPMorgan Chase fills in the dollar signs and other missing information that go with these “disclosures,” the public will have as much transparency as it does with JPMorgan’s Dark Pools.