When does giving someone the benefit of the doubt cross the line into sticking your head in the sand? The leaders of JPMorgan Chase and Barclays need to answer that question in light of newly public allegations about convicted sex offender Jeffrey Epstein and their former colleague Jes Staley.
Epstein, a JPMorgan client for more than a decade, died in 2019 while awaiting trial on additional charges of abusing young women and girls. But connections to him still cast a long shadow over individuals ranging from tech giants to royalty. Staley, who served at times as the US bank’s point person with Epstein, lost his job as Barclays chief executive in 2021 when he opted to fight a preliminary finding from the UK regulator that he had been misleading about their relationship.
Last week both banks were dragged further into the scandal when US Virgin Island authorities made public some of Staley and Epstein’s emails as part of a lawsuit alleging that JPMorgan facilitated sex trafficking at Epstein’s island compound. The US bank calls the lawsuit “meritless” and Staley, who is not a defendant, has repeatedly denied that he was aware of Epstein’s misbehaviour. Barclays declined to comment.
The lawsuit alleges that Staley used his work email to exchange 1,200 emails with Epstein and received what the lawsuit describes as “photos of young women in seductive poses” from the financier. It also alleges Epstein used JPMorgan accounts to pay more than $1 million to at least 20 victims of sexual crime. In 2009, Staley wrote to Epstein of their “profound” friendship and “heartfelt hug”. A year later he emailed: “Say hi to Snow White.” When Epstein responded: “[W]hat character would you like next?” Staley replied, “Beauty and the Beast”.
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In the lawsuit, JPMorgan’s alleged reaction to mounting evidence of Epstein’s misdeeds comes across as almost blasé. After his guilty plea in 2008, an employee speculated that his $120 million in assets would leave the bank “pending [chief executive Jamie] Dimon review”. Yet the disgraced financier stayed a client. JPMorgan said last week: “We have not seen any evidence of such a review.” If Dimon didn’t review it, who did? Did anyone? The lawsuit says that when the bank later decided to ask Epstein directly about human trafficking claims, they sent Staley.
In 2010, another email asked, “see below new allegations ... Are you still comfortable with this client who is now a registered sex offender.” The response: “These stories pop up.” When the head of anti-money laundering requested formal reapproval of Epstein as a client in 2011, someone else wrote back: “I thought we did that in approving a $50 million new line of credit last month.”
JPMorgan can certainly argue that convicted felons are entitled to bank accounts and the bank cannot be expected to pay close attention to every email and transaction involving a free-spending mogul. The bank also closed Epstein’s account in 2013, shortly after Staley departed and before Epstein become a target of worldwide outrage.
People are innocent until proven guilty, and felons who have served their time deserve second chances. But demands for incontrovertible proof can be cover for wilful blindness
Barclays never banked Epstein, but its board faces tough questions about their choices in 2020, after he was rearrested. At that time, the now public JPMorgan emails landed in the lap of UK regulators, who launched a probe into whether Staley had misled them about the nature of the Epstein relationship.
Yet Barclays’ board insisted that Staley had their “full confidence” and stuck by him for nearly another year. People familiar with the process say the board based the decision on their own investigation. It included the emails but not the attachments with the allegedly “seductive” pictures. They also took into account Staley’s history of dogged loyalty and repeated denials that he knew anything about sexual misbehaviour.
People are innocent until proven guilty, and felons who have served their time deserve second chances. But demands for incontrovertible proof can be cover for wilful blindness. When those involved are wealthy and connected to a network of powerful individuals, the pressure goes only one way.
JPMorgan has form on ignoring inconvenient facts. In 2014, it paid $2.6 billion to end a criminal probe into allegations that it turned a blind eye to Bernard Madoff’s enormous Ponzi scheme. Barclays had a history of going easy on Staley when he pushed legal and ethical boundaries. The board previously stood by him when he tried twice to uncover the identity of an anonymous whistleblower and was fined £642,430 over it.
Hindsight is always 20/20. But it is fair to ask whether JPMorgan’s interest in keeping Epstein’s business and the Barclays board’s faith in Staley have ended up damaging both institutions and may continue to do so. – Copyright The Financial Times Limited 2023
