Jamie Dimon, America’s most powerful banker, is due to be interviewed under oath about JPMorgan Chase’s relationship with sex offender Jeffrey Epstein. It's a lesson in corporate due diligence.
- Japan will impose curbs on the export of equipment used in making semiconductors, after similar moves by the US and the Netherlands.
- German insurer Munich Re quit the world’s largest climate finance alliance to avoid antitrust risks.
- Eurozone inflation dropped to 6.9 per cent in March as cost of living pressures eased.
The ghost of Jeffrey Epstein is haunting finance on both sides of the Atlantic. Jamie Dimon, America’s most powerful banker, is due to be interviewed under oath about JPMorgan Chase’s relationship with the sex offender. Meanwhile, Barclays said that allegations made against its former chief executive Jes Staley in connection with Epstein are “serious and new.”
Staley denies any wrongdoing and is robustly defending himself in relation to the investigation.
So what? The two developments are linked by Epstein, but they are different: the Dimon case is about what the chief executive knew; the Staley case is about who the chief executive was. Both stories are harbingers of a long-overdue reckoning that’s coming for business in the delayed fallout of #MeToo.
Dimon, CEO of JPMorgan since 2006, is a titan of Wall Street. He led the rescue of Bear Stearns and Washington Mutual during the 2008 financial crisis (and is the only head of a major bank still in the top job since the crash). In the last few weeks, he has coordinated the rescue of First Republic, a San Francisco bank whose shares plunged in the current banking turmoil.
In 2008, when Epstein was jailed in Florida on charges of soliciting prostitution from a child, Jes Staley was head of wealth management at JP Morgan. Epstein was one of Staley’s clients. What did Dimon know? An Epstein victim, identified only as Jane Doe, and the US Virgin Islands – where Epstein had a home – are bringing lawsuits against the bank.
Jesse Fried, professor of law at Harvard Law School, said that forcing Dimon to testify strengthens the plaintiffs’ position. “It reminds Dimon, who is the ultimate decision maker, that there could be reputational and distraction costs to the ongoing litigation,” he said.
“It also imposes costs personally on Dimon, increasing his interest in settling the case… when organisations are sued, they work hard to minimise the scope and time of the deposition.”
Staley left JP Morgan in 2013. A few months later, the bank severed its ties with Epstein.
In December 2015, Staley was appointed chief executive of Barclays. Epstein was arrested on sex trafficking charges in 2019, and was found dead in his cell later that year.
In 2020, Barclays revealed that the Financial Conduct Authority, which regulates the City, was investigating Staley’s links with Epstein. The bank’s statement said he had “the full confidence of the board”. Staley then resigned in 2021.
So who is Staley? When he resigned, Barclays said: “It should be noted that the investigation makes no findings that Mr Staley saw, or was aware of, any of Mr Epstein’s alleged crimes.” Jane Doe has said that she was sexually assaulted by “a powerful financial executive”. JP Morgan said last month that it believes this is Staley.
Key figures on the board of Barclays who declared their “full confidence” in Staley include the chairman Nigel Higgins, a former Rothschilds banker, and senior independent director Crawford Gillies, a former managing partner at Bain. They remain in place (Gillies is retiring in May).
Simon Learmount, professor in corporate governance at Cambridge Judge Business School, said the 2008 crisis tipped the balance on banking boards in favour of people with “deep financial knowledge”.
“But what that then maybe drives out is strong devil’s advocacy on the board – the truly independent outsider who can pursue the difficult questions and be the honest critical friend,” Learmount said.
A final thought: the institutional investors that dominate ownership of publicly listed companies are focused on the E of ESG, wanting boards to prioritise climate risk. That’s a good thing. But Epstein’s legacy is a reminder of the damage that can be caused by overlooking the S.
