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In Search of the Soul of JPMorgan Chase


Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like.

— Edward Thurlow, 1st Baron Thurlow (Lord Chancellor of Great Britain 1778 et seq)

As a result of JPMorgan Chase’s reappearance in the news (thanks to its criminal activities,) a number of readers have written asking me to explain how deferred prosecutions work and what happens to a corporation that fails to follow the terms of its deferred prosecution.

Deferred prosecutions for individuals are, not surprisingly, different from those for corporations. In Colorado and many other states and some federal jurisdictions, deferred prosecutions of first time individual offenders who have engaged in certain types of criminal conduct are permitted.  Defendants like deferred prosecutions.  If a defendant successfully completes its terms the defendant will spend no time in prison and have no criminal record.  Prosecutors like deferred prosecutions.  Not only is a trial avoided and the burden on the criminal justice system reduced, but the prosecutor has given nothing up.  If the defendant does not observe the terms of the deferred prosecution the prosecutor can proceed to trial.  If the defendant is convicted the defendant will have a criminal record and may end up spending time in prison.

In the corporate world, of course, deferred prosecutions are somewhat harder to understand but increasingly used. In a short article in the New York Law Journal a few months back, two New York lawyers discuss deferred prosecutions in the corporate world and the reasons for their increasing popularity by the justice department and criminal corporate defendants.  They are popular with defendants because, among other things, if the corporation can avoid a criminal conviction it makes stockholders happy and avoids the risks to the corporate welfare of the prospective defendant that would be posed by a criminal trial and a possible conviction.  It makes the government happy because it is often able to impose more draconian provisions on how the corporation operates internally than the government might be able to impose following a conviction.

All these questions arise because observant readers have noticed that JPMorgan Chase Bank has entered into a 68 page Deferred Prosecution Agreement with the United States Government.  It begins with a ten-page letter from the Department of Justice addressed to the bank’s lawyers outlining the terms of the agreement. It describes with specificity JPMorgan Chase’s criminal activities that gave rise to the proceedings.  The bank agrees that a criminal information can be filed with the court by the government and recites that the bank agrees that the extensive enumeration of criminal activities by the bank that are described in a 19 page “Statement of Facts” are “true and accurate.”  (One episode described in the Statement was that three months after Bernie Madoff was arrested,  the bank’s compliance department sent a letter to the bank’s relationship manager for Mr. Madoff, asking him to certify that the client relationship the bank had with Mr. Madoff complied with all “legal and regulatory-based policies.” The bank’s compliance department had apparently not noticed that Mr. Madoff was in jail awaiting trial.}

The Deferred Prosecution Agreement further provides that the bank will pay $1.7 billion to the United States within three days after the agreement is signed and will not try to get any tax benefit from that payment. In the part of the settlement document that pertains to the bank’s agreement with the Comptroller of the Currency, the bank acknowledges 14 different ways in which it failed to do that which it was required to do and agrees to pay the Comptroller $350 million dollars.

What readers wonder is whether there is any kind of punishment other than an additional fine to which the bank would be subject were it to fail  to honor the terms of the deferred prosecution go to trial and be convicted. The answer is probably not.  That is because some years ago Pope Innocent IV outlawed a punishment that had theretofore been imposed on corporations that misbehaved.

In a footnote to an article appearing in the Michigan Law Review in 1980, John Coffee, Jr. observes that in days of yore, ecclesiastical courts would excommunicate corporations that had been found to engage in corporate misbehavior.  Were that a possible punishment today one could almost be assured that the bank would honor its obligations under the Deferred Prosecution Agreement lest it find itself excommunicated.   Lamentably, as Mr. Coffee observes, in the 13th Century Pope Innocent IV “forbade the practice of excommunicating corporations on the unassailable logic that, since the corporation had no soul it could not lose one.”

As a result, JPMorgan Chase essentially gets off free even if it decides to ignore the deferred prosecution, goes to trial, is convicted and pays another huge fine.  Most of my readers would, however agree, that based on the conduct of JPMorgan Chase as revealed over the past years, one thing is absolutely clear.  Pope Innocent was right. Neither JPMorgan Chase nor its corporate officers has a soul to lose.  Just ask those who, having dealt with it, have suffered financial hardship thanks to its criminal, fraudulent. and socially irresponsible activities.

Christopher Brauchli is a lawyer living in Boulder, Colorado. He can be emailed at


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