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Charlotte Amalie
Thursday, June 20, 2024
HomeNewsLocal newsJPMorgan 'Broke Every Rule' in Dealings With Epstein, AG Says

JPMorgan ‘Broke Every Rule’ in Dealings With Epstein, AG Says

The JPMorgan Chase Bank headquarters in New York. (Shutterstock photo)
The JPMorgan Chase Bank headquarters in New York. (Shutterstock photo)

JPMorgan Chase “broke every rule” to facilitate Jeffrey Epstein’s sex-trafficking and feed off his wealth and connections, the V.I. Attorney General’s Office said Wednesday in response to the bank’s motion asking that the government’s lawsuit against it be dismissed.

The bank continued its relationship with Epstein even after he became a convicted sex offender in 2008, and despite communications from its own risk management divisions as early as 2006 identifying evidence of his human trafficking, according to the government’s memorandum opposing JPMorgan’s motion to dismiss the case.

“Sex-trafficking was the principal business of Epstein’s accounts held by JPMorgan, and JPMorgan profited handsomely from the hundreds of millions of dollars in assets in those accounts,” the memorandum alleges.

“Far from the so-called ‘ordinary’ banking services JPMorgan claims it provided to Epstein, JPMorgan broke every rule to facilitate Epstein’s sex-trafficking and feed off his wealth and connections,” it says, alleging that the relationship continued until the wealthy financier’s 2019 death.

JPMorgan, in its motion to dismiss the suit, said the “USVI’s lawsuit is a masterclass in deflection that seeks to hold JPMC responsible for not sleuthing out Epstein’s crimes over a decade ago. Yet USVI had access at the time to the same information, allegations, and rumors about Epstein on which it alleges JPMC should have acted.”

Key to their argument is the fact that the V.I. government, through its Economic Development Commission, granted Epstein lucrative tax benefits during the same period that it is accusing JPMorgan Chase of helping to further his sex trafficking scheme.

The bank contends that, having won a $105 million settlement in its lawsuit against Epstein’s estate in November, the V.I. Attorney General’s Office “now casts afield for deeper pockets.”

A Focus on CEO of Private Banking

Epstein, 66, was found dead by apparent suicide in August 2019 in his New York City jail cell where he was being held on federal human trafficking charges. Those charges stemmed from investigations into his controversial 2008 non-prosecution agreement with federal prosecutors in Florida, under which he pled guilty to state charges of soliciting and procuring a minor for prostitution, despite evidence that dozens more girls were involved. He served 13 months in a work-release program, made payments to victims, and became a registered sex offender.

At the time of his death, Epstein’s U.S. Virgin Islands estate was valued at more than $577 million, according to court records.

His primary residence was Little St. James, his private island off St. Thomas where for years he trafficked in girls and young women and ran a complex web of shell companies registered in the USVI that enabled his crimes, those documents allege.

The V.I. government’s 34-page first amended complaint, filed in January after the initial suit was filed in December, asserts claims for JPMorgan’s violations of the Trafficking Victims Protection Act, or TVPA; the Virgin Islands Criminally Influenced and Corrupt Organizations Act, or CICO; and the Consumer Fraud and Deceptive Business Practices Act, or CFDBPA.

It focuses on one man in particular, former CEO of private banking James “Jes” Staley, who it says exchanged approximately 1,200 emails with Epstein from his JPMorgan email account between 2008 and 2013.

Staley left JPMorgan in 2013, the same year the bank alleges it cut its ties with Epstein, according to the complaint. At the time of Epstein’s death, he was the CEO of Barclays; however, he stepped down from that position in November 2021 after British financial regulators concluded an investigation into his characterization of his relationship with Epstein, it says.

Wednesday’s memorandum further details the email communications between the two men, saying some included photos of young women in provocative poses, discussed Epstein’s provision of services to Staley during his travel to Little St. James and elsewhere on dates that closely corresponded with Epstein’s payments to the same young woman from his JPMorgan accounts, and discussed young women or girls procured by Epstein using the names of Disney princesses.

‘That Was Fun. Say Hi to Snow White’

According to the government’s memorandum, a December 2008 email showed Staley planning to visit Epstein in early January 2009. Around the time of the scheduled trip, Epstein wired $2,000 from his JPMorgan account to a woman with an Eastern European surname. In late August 2009, Staley emailed that he was visiting London; Epstein asked if he needed anything; Staley replied “Yep.” Soon after, JPMorgan wired $3,000 from an Epstein account to the same Eastern European woman, it alleges.

“In July 2010, Staley emailed Epstein saying ‘That was fun. Say hi to Snow White[,]’ to which Epstein responded ‘[W]hat character would you like next?’ and Staley said ‘Beauty and the Beast.’ Epstein also emailed Staley photos of young women in seductive poses,” according to the memorandum.

None of the emails between Epstein and Staley were flagged in connection with risk reviews of Epstein’s accounts, which numbered at least 50 and involved large cash transactions, the amended complaint alleges.

Meanwhile, throughout 2010 and 2011 JPMorgan’s compliance and security divisions were reporting evidence of Epstein’s engagement in sex-trafficking, including his settlement of a dozen civil lawsuits and his payment of $1 million in connection with allegations he engaged in child sex-trafficking with the MC2 modeling agency, “luring” girls on the pretext of providing opportunities and careers, the memorandum states.

In a 2010 internal email, it says, JPMorgan’s risk management division wrote of new allegations “of an investigation related to child trafficking — are you still comfortable with this client who is now a registered sex offender.”

Following the internal reports of additional law enforcement investigations into Epstein’s sex-trafficking in 2010 and 2011, “JPMorgan’s response was to send Staley in 2011 to obtain Epstein’s denial, on which the bank hung its hat,” it alleges.

Red Flags Ignored

Epstein companies and non-profit organizations that had accounts with JPMorgan included the 2013 Butterfly Trust; Coatue Enterprises LLC; the C.O.U.Q. Foundation; Enhanced Education; Financial Trust Company, Inc.; HBRK Associates, Inc.; Hyperion Air, Inc; JEGE, Inc.; JEGE, LLC; NES, LLC; Plan D, LLC; Southern Financial, LLC; and Southern Trust Company, according to the suit.

The Southern Trust Company, which received lucrative tax benefits under the territory’s EDC program, was central to the V.I. government’s suit against the Epstein estate, which settled the matter while not admitting any wrongdoing.

Southern Trust was little more than a shell company for Epstein’s sex-trafficking scheme, the government alleged in a second amended complaint filed in its case against the estate just hours before a settlement was announced Nov. 30. As part of that settlement, the estate will refund some $80 million it reaped from those tax benefits.

In Wednesday’s memorandum, the government alleges that JPMorgan handled Epstein’s payments “even though they had no discernible business or other legitimate purpose and engaged in a years-long pattern of ignoring obvious red flags and failing to demonstrate even basic due diligence on Epstein’s accounts — which is particularly out-of-the-ordinary conduct by JPMorgan for a customer it designated high-risk.”

For example, the government alleges that Epstein, through JPMorgan, paid more than $600,000 to Jane Doe 1, a woman with an Eastern European surname, who the bank’s own due diligence reports stated Epstein purchased at the age of 14.

Between 1998 and 2013, JPMorgan serviced approximately 55 Epstein-related accounts valued in the hundreds of millions of dollars, and handled payments by Epstein to at least 20 young women or girls whom he trafficked and subjected to sexual assault in the Virgin Islands and elsewhere, the memorandum states. The payments had no conceivable relationship to Epstein’s stated business interests, it says.

Epstein also withdrew hundreds of thousands of dollars in cash over that time from JPMorgan accounts, “especially significant as Epstein was known to pay for ‘massages’ (sexual encounters) with young girls in cash. During this time, JPMorgan also processed payments by Epstein totaling almost $1.5 million to known recruiters of victims to Epstein’s sex-trafficking enterprise, including the MC2 modeling agency,” the government alleges.

“After Epstein’s arrest and death in 2019, JPMorgan acknowledged that recipients of the payments ‘may be victims of human trafficking,’” it said.

“There is no question JPMorgan received financial benefits in the form of servicing accounts with hundreds of millions in assets and referrals of business opportunities from its relationship with Epstein, including the acquisition of one of the country’s largest hedge funds as a customer,” the memorandum states.

And despite the bank’s assertion that USVI territorial law racketeering and unfair competition claims against it do not apply because its alleged conduct occurred entirely in New York, “JPMorgan’s criminal activity under CICO occurred almost entirely in the Virgin Islands,” the government alleges.

“For two decades, JPMorgan transacted business with a Virgin Islands resident and his Virgin Islands entities, including managing accounts worth hundreds of millions of dollars, the principal business of which was trafficking including in and from the Virgin Islands,” it says.

Bank Says Allegations ‘Strain Credulity’

The government’s allegations that JPMorgan “acted with the requisite willfulness to criminally violate federal banking law strain credulity,” the bank said in its motion to dismiss the suit, and noted Epstein’s lucrative tax breaks through the EDC program.

“Despite the fact that Epstein was a registered Tier 1 sex offender in the Virgin Islands, it is not clear what, if any, diligence the EDC conducted into [Southern Trust Company] or Epstein before granting these privileges,” according to the motion.

“USVI now alleges that JPMC failed to fulfill an unspecified duty to detect and report Epstein’s sex trafficking,” and that he used his accounts with the bank to further his scheme, yet its complaint merely points to public records and reports about Epstein — “information to which USVI also had access when it granted Epstein-related entities economic benefits,” it says.

“Moreover, while the Complaint asserts that ‘damages [were] incurred’ until August 2019, it never explains how or why this was possible six years after JPMC decided to terminate its relationship with Epstein,” the memorandum states.

Nonsense, the government countered in its memorandum on Wednesday.

The termination of Epstein’s accounts in 2013 did not end the bank’s conduct, it says, though the sentence that follows is heavily redacted, so it is unclear just how the relationship continued.

“JPMorgan’s failed attempt to divert attention from its participation in Epstein’s sex-trafficking is understandable, as its attempted defenses to the Government’s TVPA, CICO, and CFDBPA claims have no merit,” according to Wednesday’s memorandum from the V.I. Attorney General’s Office.

“JPMorgan’s conduct threatened public safety and caused serious harm to the Virgin Islands and its residents by facilitating sex-trafficking and the commission of sexual abuse against young women and underage girls in the Virgin Islands,” it says.

“For all the reasons set forth above, the motion to dismiss should be denied,” the 31-page government memorandum concludes.

Wednesday’s memorandum was filed in Manhattan federal court, where the case has been consolidated for pretrial purposes with two others brought as class actions in November in federal court in Manhattan by an alleged victim of Epstein: Jane Doe 1 v. Deutsche Bank, and Doe 1 v. JPMorgan Chase & Co.

JPMorgan is represented by the law firm of Wilmer Cutler Pickering Hale and Dorr LLP.

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