Top Business Negotiations of 2013: JPMorgan’s DOJ settlement

By — on / Business Negotiations

In July 2013, U.S. Associate Attorney General Tony West met with JPMorgan Chase executives to outline an array of civil and criminal investigations of the bank, related primarily to its sales of troubled mortgage investments during the financial crisis.

Along with its own behavior, the bank would be responsible for any charges stemming from improper sales of mortgage securities by two banks it had purchased during the financial crisis, Bear Stearns and Washington Mutual. In the United States, companies commonly assume the legal liabili¬ties of the firms they acquire unless they negotiate otherwise. JPMorgan apparently failed to negotiate more favorable terms in 2008.

Dimon was anxious to head off formal legal charges, which would have been a devastating blow to the bank’s reputation. At 8 a.m. on September 24, four hours before the Department of Justice’s (DOJ) scheduled news conference to announce charges against JPMorgan, Dimon called West and asked to meet in person. The news conference was scuttled.

By October 18, JPMorgan had backed down from its demand that the DOJ call off the possibility of criminal charges after its lawyers advised Dimon that actual charges were unlikely. The DOJ’s settlement with JPMorgan, officially announced on November 19, will include the largest settlement payment the DOJ has ever negotiated from a single corporation—$13 billion.

By appointing himself lead negotiator, Dimon conveyed to the DOJ that he was committed to forging a deal. When a negotiation stalls, “sending in the big guns” can be an effective means of moving forward.

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