JPMorgan Chase & Co has been ordered by a United States state court to pay over $18 million to a trust in a lawsuit that was filed because of the bank’s recommendation of a security that was not suitable for the trust and actually was a benefit to the bank.
Judge Linda Morrissey, from the District Court for Tulsa County in Oklahoma, wrote that the bank was involved in misconduct and also breached its duties of care to the trust when it recommended the “variable prepaid forward contracts.”
The bank and the trust engaged in prepaid forward contracts from 2000 to 2005. In 2007, the trust’s assets were ordered transferred to another bank by a court. Morrissey also ordered that the bank pay punitive damages, which will be determined later, as well as the legal fees for the trust.
According to a spokesperson for JPMorgan, the bank does not agree with the court’s ruling. In a statement, the spokesperson said that the bank “will take all appropriate measures to respond, including appealing the decision.”
The court said in its ruling that the bank breached its fiduciary duty when it invested proceeds from the contracts in its investment products. The bank charged investment fees on those transactions as well as corporate trustee fees. Those fees “amounted to double dipping that was inherently unreasonable,” Morrissey wrote in her decision. Morrissey also wrote that assigning punitive damages to JPMorgan are justified because the bank “has been guilty of reckless disregard for the rights of others.”