JP Morgan Is About To Pay A Gigantic Fine, And It Could Still Face Criminal Charges

Multiple outlets are reporting JP Morgan will pay a $13 billion civil penalty for allegedly failing to warn investors about risks in mortgage backed securities trades.

It would be the largest civil penalty ever levied, representing more than half of the bank's 2012 profits.

But it may still not be enough to shield it from the Justice Department's Sacramento-based prosecutors.

The New York Times' Andrew Ross Sorkin reported yesterday the Eastern District of California division wants to continue to pursue criminal charges:

"While the deal would put those civil cases to rest, it would not save JPMorgan from a parallel criminal inquiry from federal prosecutors in California, the people briefed on the talks said.

"Under the terms of the preliminary deal, the people said, the bank would also have to assist prosecutors with an investigation into former employees who helped create the mortgage investments."

According to Bloomberg, the California case is centered on alleged crimes committed by JPMorgan itself and not by employees of Bear Stearns or Washington Mutual, whose banking units JP Morgan acquired at the height of the financial crisis.

For a moment, it appeared the bank would avoid a criminal indictment, but talks over ending the Sacramento probe apparently broke down at the last minute. Sorkin:

Mr. Holder told Mr. Dimon that he could not shut down the criminal investigation, reiterating an argument he made when the two met last month in Washington. The associate attorney general, Tony West, was also at that meeting and on the phone call Friday night.

If criminal charges do surface, the impact would likely be reputational as well as financial, as specific individuals could be facing charges, Bloomberg's Dawn Kopecki reported in September.

Read Sorkin's full story on NYTimes.com »