July 13 (Bloomberg) -- Ina Drew, the former head of a JPMorgan Chase & Co. unit responsible for $5.8 billion in trading losses this year, will forfeit her pay and other managers were ousted after an internal inquiry found employees may have intentionally hid souring bets.
The bank accepted Drew’s offer to return about two years of compensation, the maximum clawback allowable under employment terms, said Joe Evangelisti, a company spokesman. Other London- based managers of the chief investment office’s synthetic-credit bets left without severance and will be required to forfeit as much as two years of pay, including restricted stock and options, the bank said in a presentation. Recordings, e-mails, and documents show traders may have tried to mask losses by mismarking positions, according to the presentation.
“We’ve made the decision to claw back compensation from each of these individuals,” said Michael Cavanagh, who was enlisted from running Treasury and Security Services to run the review. He didn’t name the managers. The money-losing bets were overseen by Bruno Iksil, known as the London Whale, his boss Javier Martin-Artajo and former Europe CIO head Achilles Macris.
The largest U.S. bank lost almost $40 billion in market value in the months after Bloomberg News reported April 5 that the London unit’s illiquid bets on credit derivatives were big enough to move markets. The firm restated first-quarter results today to reduce profit by $459 million, in part because London traders had priced their positions “aggressively” toward the end of market spreads, Cavanagh said.
The company decided to restate after executives and lawyers interviewed employees, reviewed tens of thousands of hours of tapes and searched about 1 million e-mails.
Other Gains
“We just have questions about whether the traders were doing what they need to do for accounting, which is put a mark on their positions where they think they can exit,” Cavanagh told reporters on a conference call. “Instead it felt more like they were pricing their marks a little bit more aggressively, but generally inside the bid-ask spread.”
Net income fell 9 percent to $4.96 billion for the three months ended June 30, including a $4.4 billion loss on the trades. The bank boosted second-quarter profits with $1 billion in securities gains, $2.1 billion in reserve releases and an $800 million accounting gain on the cost of the company’s debt.
Drew, 55, was awarded about $29 million in total compensation for 2010 and 2011, according to JPMorgan’s regulatory filings. She retired May 14 with about $57.5 million in stock, pension and other pay, according to bank disclosures and estimates from consulting firm Meridian Compensation Partners LLC. About $21.5 million of that money, based on the May 14 closing price, would have been automatically forfeited if she had been fired for cause.
‘Acted With Integrity’
“She has acted with integrity and tried to do what was right for the company at all times, even though she was part of this mistake,” Chief Executive Officer Jamie Dimon said today during a meeting with analysts. “In that spirit, Ina came forward and offered to give up a very significant amount of her past compensation.”
The bank accepted Drew’s offer to return about two years of compensation, the maximum clawback allowable under employment terms, said Joe Evangelisti, a company spokesman. Other London- based managers of the chief investment office’s synthetic-credit bets left without severance and will be required to forfeit as much as two years of pay, including restricted stock and options, the bank said in a presentation. Recordings, e-mails, and documents show traders may have tried to mask losses by mismarking positions, according to the presentation.
“We’ve made the decision to claw back compensation from each of these individuals,” said Michael Cavanagh, who was enlisted from running Treasury and Security Services to run the review. He didn’t name the managers. The money-losing bets were overseen by Bruno Iksil, known as the London Whale, his boss Javier Martin-Artajo and former Europe CIO head Achilles Macris.
The largest U.S. bank lost almost $40 billion in market value in the months after Bloomberg News reported April 5 that the London unit’s illiquid bets on credit derivatives were big enough to move markets. The firm restated first-quarter results today to reduce profit by $459 million, in part because London traders had priced their positions “aggressively” toward the end of market spreads, Cavanagh said.
The company decided to restate after executives and lawyers interviewed employees, reviewed tens of thousands of hours of tapes and searched about 1 million e-mails.
Other Gains
“We just have questions about whether the traders were doing what they need to do for accounting, which is put a mark on their positions where they think they can exit,” Cavanagh told reporters on a conference call. “Instead it felt more like they were pricing their marks a little bit more aggressively, but generally inside the bid-ask spread.”
Net income fell 9 percent to $4.96 billion for the three months ended June 30, including a $4.4 billion loss on the trades. The bank boosted second-quarter profits with $1 billion in securities gains, $2.1 billion in reserve releases and an $800 million accounting gain on the cost of the company’s debt.
Drew, 55, was awarded about $29 million in total compensation for 2010 and 2011, according to JPMorgan’s regulatory filings. She retired May 14 with about $57.5 million in stock, pension and other pay, according to bank disclosures and estimates from consulting firm Meridian Compensation Partners LLC. About $21.5 million of that money, based on the May 14 closing price, would have been automatically forfeited if she had been fired for cause.
‘Acted With Integrity’
“She has acted with integrity and tried to do what was right for the company at all times, even though she was part of this mistake,” Chief Executive Officer Jamie Dimon said today during a meeting with analysts. “In that spirit, Ina came forward and offered to give up a very significant amount of her past compensation.”