Newspaper article International New York Times

Lawsuit Challenges JPMorgan Settlement ; Deal on $13 Billion Fine Needed a Judge's Review, Nonprofit Group Says

Newspaper article International New York Times

Lawsuit Challenges JPMorgan Settlement ; Deal on $13 Billion Fine Needed a Judge's Review, Nonprofit Group Says

Article excerpt

The suit argues the Justice Department violated the constitutional principle of separation of powers when it "unilaterally" struck a $13 billion settlement over faulty mortgage securities.

With a record $13 billion sticker price, the settlement deal between JPMorgan Chase and the government captured the attention of Wall Street and Washington late last year.

And yet, according to a lawsuit that a nonprofit group filed against the Justice Department on Monday, the crucial details of the deal were for the government's eyes only. The lawsuit filed by Better Markets, a group critical of Wall Street, challenged the constitutionality of the deal, a settlement stemming from accusations that JPMorgan had overstated the quality of mortgage securities it sold before the financial crisis.

In a complaint filed on Monday in the United States District Court for the District of Columbia, Better Markets argued that the Justice Department violated the constitutional principle of separation of powers when it "unilaterally" struck the deal without a judge's blessing.

"The executive branch, through DOJ, acted as investigator, prosecutor, judge, jury, sentencer and collector, without any review or approval of its unilateral and largely secret actions," Better Markets said in the lawsuit.

The lawsuit, the latest development in a case that was long thought to be closed, could provide a backdoor route for subjecting the deal to judicial scrutiny. Better Markets is seeking to have a judge approve an injunction that would scuttle the pact -- unless the Justice Department provides "an ample and detailed record so that such court may review all the facts and circumstances."

Better Markets said its lawsuit was probably the first of its kind.

JPMorgan declined to comment. In a statement, the Justice Department said it was "confident that the settlement reached with JPMorgan Chase complies with the law."

While the Better Markets lawsuit faces an uncertain future, the case could muddy the image of an investigation that put Wall Street on high alert. …

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