A U.S. District Court judge has denied a judge made by two former bankers at JPMorgan Chase & Co. (NYSE: JPM) to dismiss a suit from the Securities and Exchange Commission, which alleged that the bankers participated in a pay-to-play scheme in Alabama which allowed the bank to win almost $5 billion worth of bond and interest rate swap business, according to a report from Bloomberg News.
Judge Abdul Kallon rejected arguments made by JPMorgan Chase & Co. (NYSE: JPM)’s former head of municipal derivatives desk, Douglas MacFaddin and investment banker Charles LeCroy that the SEC does not have the jurisdiction over interest rate swaps. The unregulated derivatives were used by the country in order to lower borrowing costs in debt which was used to rebuild its waste water system.
Kallon said in his ruling that it was too earlier in the case to resolve whether or not the swaps were based on securities and subject to SEC oversight. The jurisdictional challenge failed because they relied on an interest-rate index rather than an index of securities, said Kallon in a 22 page opinion.
The suit was filed by the Securities and Exchange Commission against the two last year, which alleged that JPMorgan Chase & Co. (NYSE: JPM) made more than $8 million in undisclosed payments to friends of county commissioners. The associates worked at local broker-dealer firms which did not do any work on the deals, which Bloomberg reported nearly bankrupted the county.
Former Jefferson County Commission and former mayor of Birmingham Larry Langford is serving 15 years in prison after being convicted of accepting $235,000 in designer clothes, Rolex watches and cash from an Alabama banked who paid almost $3 million by JPMorgan Chase & Co. (NYSE: JPM).
