A week after a Goldman Sachs executive’s resignation over allegations the Wall Street firm places its interests over those of its clients, the unsealing of a 2009 arbitration agreement paints an unflattering picture of Goldman’s crosstown rival JPMorgan. The Kansas City Business Journal broke the news that arbitrators found the New York bank had breached a 2003 revenue-sharing agreement with the asset management firm American Century in order to suppress the firm’s value and make it a cheap acquisition target.
The panel awarded American Century $373 million last summer, and JPMorgan paid $384 million (with interest added) after a Missouri judge upheld the decision in December. The findings and decisions were made public this week following a request by the Business Journal to unseal the case. American Century sought redress against JPMorgan in 2009, alleging JPMorgan had breached an agreement to market its funds in their Retirement Plans Service joint venture.
Instead, the arbitrators found, JPMorgan gave incentives to its salespeople to promote its own funds and went so far as to misrepresent the risk profile of American Century funds.
A damning e-mail the Business Journal quotes in the ruling against the bank references Jes Staley, currently the head of Morgan’s investment banking division, saying Staley’s objective was to consolidate the two firms and “control their distribution” for the purpose of “gaining control at a minimum price.”
JPMorgan issued a statement saying that “since the arbitrators found in favor of American Century, JPMorgan’s point of view and arguments are not represented in the decision,” and declined to comment further.
The arbitrators and court addressed the legal issues, but at a time when the moral standing of financial institutions has fallen in public opinion, the ethical issues at stake should not go uncommented on.