July 18, 2012 / 8:55 PM / 6 years ago

In the JPMorgan scandal, a rush to hire lawyers

NEW YORK (Reuters) - The two-month-old investigation by U.S. authorities into how a group of traders in London caused a nearly $6 billion trading loss at JPMorgan Chase & Co. is leading some players who were connected to the unit involved in the scandal to hire lawyers.

A woman walks past JPMorgan Chase & Co's international headquarters on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton

The latest former JPMorgan executive to retain a lawyer to deal with the federal probe and the bank’s ongoing internal investigation is Irvin Goldman, who was the chief risk officer for the bank’s Chief Investment Office (CIO) during the period when the trading losses began to mount.

Goldman, who resigned last week, has hired a New York defense attorney to represent him, confirmed a person familiar with the matter who did not want to be publicly identified because the investigation is continuing. Goldman is at least the fifth person once employed by JPMorgan to retain counsel in the matter some have dubbed the “London Whale” blunder.

Goldman, who served as the chief risk officer for the CIO from February 1 until May 14, could not be reached for comment.

Kristin Lemkau, a JPMorgan spokeswoman, said that Goldman asked to leave the company and that during his tenure he “behaved with integrity and we wish him well.”

Former JPMorgan employees associated with the Chief Investment Office began to retain lawyers as the investigation by U.S. authorities became more serious last week in the wake of the bank’s recent finding that three London traders may have tried to hide some of the losses.

Reuters earlier reported that on July 12, a day before JPMorgan reported second-quarter earnings, the bank notified U.S. securities regulators and criminal authorities that an internal investigation had raised questions about the integrity of some of the valuations used by the traders. The bank also told U.S. authorities it would need to restate its first-quarter earnings.

The London Whale is a reference to Bruno Iksil, a London trader at JPMorgan who made the largest bets on derivatives tied to corporate debt. Iksil and two other London-based traders, Achilles Macris and Javier Martin-Artajo, recently left the bank.

The investigation by federal authorities is now focusing on the bank’s finding that the three London traders may have taken steps to hide their losses, according to people familiar with the matter who are not permitted to speak publicly.

Ray Silverstein, Iksil’s lawyer in London, said his client does not believe he did anything wrong and “is confident he will be exonerated.”

A lawyer for Macris declined to comment. The lawyer for Martin-Artajo did not return requests for comment.

Legal experts say that in the early stage of an investigation it not uncommon for individuals with Wall Street firms to retain lawyers even if they are not viewed as potential suspects by law enforcement.

In an announcement on July 13, the bank said it had found recordings, emails and documents that showed the three CIO traders may have mismarked their positions and that it would claw back compensation from CIO employees.

Ina Drew, who served as the head of the CIO office until the shakeup on May 14, was among those set to lose compensation in the clawbacks. A lawyer for Drew, who lives in upscale Short Hills, N.J., did not respond to a request for comment.

Additional reporting by Matthew Goldstein. Editing by Jennifer Ablan and Ciro Scotti

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