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Record #: O2014-77   
Type: Ordinance Status: Failed to Pass
Intro date: 1/15/2014 Current Controlling Legislative Body: Committee on Committees, Rules and Ethics
Final action: 5/20/2015
Title: Removal of JPMorgan Chase Bank as municipal depository
Sponsors: Hairston, Leslie A., Sawyer, Roderick T., Fioretti, Bob
Topic: FINANCE FUNDS - Depositories of City/School Funds
Attachments: 1. O2014-77.pdf
Related files: R2015-407
Committee on Finance
 
ORDINANCE
 
 
WHEREAS, on November 19, 2013, affiliates of JPMorgan Chase & Co. and the U.S. Justice Department reached a record $13 billion civil settlement related to JPMorgan's mortgage security business activities; and
 
WHEREAS, between 2005 and 2007, JPMorgan purchased loans for the purpose of packaging and selling residential mortgage-backed securities; and
 
WHEREAS, before purchasing loans from third parties, employees at JPMorgan conducted due diligence to confirm, among other things, that the loans complied with the originator's underwriting guidelines; and
 
WHEREAS, through that due diligence process, JPMorgan employees were infonned by due diligence vendors that a number of the loans included in at least some of the loan pools that it purchased, and subsequently securitized, did not comply with the originators' underwriting guidelines, and, in the vendor's judgment, did not have sufficient compensating factors, and that a number of the properties securing the loans had appraised values that were higher than the values derived in due diligence testing from automated valuation models, broker price opinions or other valuation due diligence methods; and
 
WHEREAS, JPMorgan represented to investors in various offering documents that loans in the securitized pools were originated generally in conformity with the loan originator's underwriting guidelines, and that exceptions were made based on compensating factors determined after careful consideration on a case-by-case basis; and
 
WHEREAS, the offering documents further represented, with respect to representations and warranties made to JPMorgan by sellers and originators of the loans, that JPMorgan would not include any loan in a pool being securitized if anything has come to JPMorgan's attention that would cause it to believe that the representations and warranties of a seller or originator would not be accurate and complete in all material respects; and
 
WHEREAS, notwithstanding these representations, in certain instances, at the time these representations were made to investors, the loan pools being securitized contained loans that did not comply with the originators' underwriting guidelines; and
 
WHEREAS, in January of 2014, JPMorgan agreed to pay $1.7 billion to the U.S. Justice Department as part of a deferred-prosecution stemming from two felony violations of the Bank Secrecy Act, a federal law that requires banks to alert authorities to suspicious activity; and
 
 
WHEREAS, the settlement stems from charges that JPMorgan turned a blind eye to the Ponzi scheme run by Bernard L. Madoff; and
 
WHEREAS, pursuant to the agreement, JPMorgan consented to the filing of a two-count Information in the United States District Court for the Southern District of New York, charging JPMorgan with failure to maintain an effective anti-money laundering program, in violation of Title 31, United States Code, Sections 5318(h) and 5322(a) and Title 12, Code of Federal Regulations, Section 21.21, and failure to file a suspicious activity report, in violation of Title 31, United States Code, Sections 5318(g) and 5322(a) and Title 12, Code of Federal Regulations, Section 21.11; and
 
WHEREAS, pursuant to the agreement, JPMorgan admitted and stipulated to certain facts related to its banking relationship with Madoff and its conduct relevant to the aforementioned criminal charges; and
 
WHEREAS, according to reports, U.S. prosecutors and regulators are also examining whether JPMorgan violated the Foreign Corrupt Practices Act by hiring children and other relatives of well-connected politicians in hopes of steering business to the firm in the Asia Pacific region, including China; and
 
WHEREAS, Section l-23-020(a) ofthe Municipal Code of Chicago provides that no business entity shall be eligible to do business with the city if it or any controlling person of such business entity has been convicted of a felony or of a criminal offense of whatever degree, involving bribery, theft, fraud, forgery, perjury, dishonesty or deceit, or attempts thereof; and
 
WHEREAS, Section l-23-020(b) ofthe Municipal Code of Chicago also provides that no business entity shall be eligible to do business with the city if it or any controlling person of such business entity has made in any civil or criminal proceeding an admission of guilt of any ofthe conduct set forth in the previous recital; and
 
WHEREAS, pursuant to an ordinance adopted by the City Council of the City of Chicago on May 12, 2010, and published in the Journal of Proceedings of the City Council ofthe City of Chicago for such date at pages 89665 through 89667 inclusive, the City Council of the City of Chicago adopted an ordinance designating financial institutions as legal depositories for the monies of the City of Chicago and the Board of Education ofthe City of Chicago; now therefore
 
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CHICAGO:
 
SECTION 1. Section 1 of the ordinance adopted by the City Council of the City of Chicago on May 12, 2010, and published in the Journal of Proceedings of the City Council ofthe City of Chicago for such date at pages 89665 through 89667 inclusive is hereby amended by deleting the language stuck through, as follows:
 
{Omitted text is unaffected by this ordinance)
 
 
2
 
 
Albany Bank & Trust Co. N.A.
Amalgamated Bank of Chicago
Bank of America, National Association
Belmont Bank & Trust Company
Citibank, N.A.
Cole Taylor Bank
Covenant Bank
Fifth Third Bank
First Eagle Bank
Harris N.A.
Highland Community Bank
Illinois/Service Federal S&L Association of Chicago JPMorgan Chase Bank, National Association Lakeside Bank
PNC Bank National Association
Pacific Global Bank
Seaway Bank and Trust Company
ShoreBank
The Northern Trust Company
(Omitted text is unaffected by this ordinance)