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Harry Cassin
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JPMorgan Chase’s $920 million spoofing settlement: Do DPAs and NPAs encourage recidivism?

Last month, the Commodity Futures Trading Commission ordered JPMorgan Chase & Company and its subsidiaries to pay a total of $920.2 million for artificially manipulating market prices of precious metals by sending false signals to other market participants. This spoofing settlement is the highest monetary relief ever imposed by the CFTC. But is it just another high-dollar settlement in what has become a pattern of recidivism over the last decade?

JPMorgan Chase has entered multiple pre-trial agreements with the Department of Justice. After admitting to being a part of the Bernie Madoff Ponzi Scheme in 2014, it paid a $1.7 billion settlement as part of a DPA. And in 2016, it paid $264 million as a part of an NPA to settle FCPA charges.

Based on the most recent CFTC order, it seems that each of these NPAs/DPAs was entered into while JPMorgan was conducting its most recent market manipulation scheme.

JPMorgan Chase isn’t the only recidivist. According to a report by Public Citizen, as of the end of 2019, the DOJ has brought 38 criminal actions against companies that have entered into DPAs or NPAs, and 63 percent of these actions resulted in one or more additional DPAs or NPAs. Other recent recidivist offenders include, among others, Halliburton, Goodyear, Zimmer Biomet, Orthofix International, and Novartis, Public Citizen said.

The DOJ has only held around one percent of companies accountable for violating the terms of their DPAs and NPAs, after future bad acts were committed. Out of 535 corporate NPAs/DPAs, there have only been seven instances in which the DOJ has taken any actions to pursue further punishment against the recidivist violators. Of these seven instances, there were only three times in which the DOJ actually prosecuted a company for its second violation, according to the Public Citizen report.

The pattern again raises the question of whether these companies view NPAs not as a punishment, but as a calculated cost of doing business. Critics have long argued that DPAs/NPAs simply allow corporate defendants to pay their way out of real accountability for criminal misconduct.

Some critics even suggest that a DPA/NPA in an FCPA case looks much like a company paying a government official to avoid facing the law, bearing too close a kinship to the very bribes the FCPA prohibits. That comparison goes too far, of course, but difficult questions remain.

Given these high recidivism rates, it’s not clear that NPAs/DPAs provide sufficient incentive for companies to discontinue their bad acts. The purpose of corporate enforcement, of course, is to change organizational attitudes toward the law. JPMorgan Chase leaves us wondering whether DPAs/NPAs are the way to do it.

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