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JP Morgan Pays $384 Million Arbitration Award
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JPMorgan’s payment of $384 million arbitration award to American Century Investment Management has been uncharacteristic as being accompanied by verbal protest without legal appeal. The recent quiet settlement proves one thing – JPMorgan is as much crooked in its dealings with corporate partners as widely perceived.

In the case of American Century Investment Management Inc v. JPMorgan Invest Holdings LLC, Circuit Court of Jackson County, Missouri, no. 1116-CV21103, the panel of the American Arbitration Association held that JPMorgan’s asset management unit had deliberately breached a 2003 contract made with American Century Investment Management. It did so by promoting its own funds at the expense of American Century funds. The contract and consequent violations relate to JPMorgan’s purchase of a retirement plan services business from American Century.

In a perfunctory attempt to save face, Kristen Chambers, a JPMorgan spokeswoman stated, “We disagree strongly with the arbitrators’ decision and award, because among other things, it misinterprets the contract, ignores facts favorable to us such as the performance of certain American Century Funds during the period in dispute, and ignores expert opinions that were favorable to us.”

  
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The arbitration, which was won by American Century in August 2011, was confirmed by a Missouri state court on December 6. The payment was kept under wraps until with annual accounts, JPMorgan included the payment as “non-client litigation” expense in its results for third quarter of last year.

JPMorgan’s Corporate Scheming:

  • According to the contract made while JPMorgan bought the Retirement Plan Services of American Century, JPMorgan agreed to promote the American Century funds
  • It was proved later that JPMorgan held a large minority stake in American Century’s parent company and had the intent to buy the entire company
  • JPMorgan pursued a process by which American Century funds started to perform poorly, following a strategy that the company would become cheaper to buy if it showed poor performance
  • Following its strategy to devalue American Century, and create the stage to buy it at throwaway prices, JPMorgan started pushing in-house funds and encouraging customers to swap out of American Century funds
  • JPMorgan tacitly created an understanding in American Century employees that “sales and promotion of JPMAM products were more beneficial to their careers than sales and promotion of ACI or other managers’ products,” found the arbitration panel
  • Jes Staley of JPMorgan was found wearing ‘dual hats’ by sitting on the board of the parent company of American Century while being responsible for boosting profit at JPMorgan Asset Management
  • When questions started being asked, JPMorgan sold their stake in American Century to Canadian Imperial Bank of Commerce

The arbitrators held that JPMorgan “breached the contract over and over again …Evidence that compels this finding and conclusion of the one-sided sales and marketing support given to JPMorgan Asset Management and its funds is voluminous.”

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While the award had been confidential until now, JPMorgan disclosed it on Wednesday.





 

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