JPMorgan Chase Fights $115 Million Legal Fee Obligation
JPMorgan Chase & Co. is trying to sidestep a huge legal bill totaling $115 million linked to two former business partners convicted of defrauding the bank for $175 million.
On Friday, the major lender submitted legal documents in Delaware, asking a judge to overturn a previous decision that held it responsible for paying the lawyers of Charlie Jarvis and his co-conspirator, Olivier Hamard.
According to the filing, Jarvis’ legal team, comprising five different law firms, has charged JPMorgan around $60.1 million in legal fees and expenses, while Hamard’s representation has billed the bank nearly $55.2 million.
JPMorgan claims that the total legal fees accumulated by Jarvis and Hamard’s attorneys amount to $115 million, with one law firm alone receiving $35.6 million in reimbursements.
In contrast, Elizabeth Holmes, who was found guilty of deceiving investors in the Theranos scandal, reportedly faced around $30 million in legal fees.
“The legal fees charged by Charlie Jarvis and Olivier Hamard are clearly excessive,” a JPMorgan spokesperson noted. “We anticipate presenting evidence of this abuse in court soon.”
Jarvis, convicted in March, was sentenced to seven years in federal prison last month, despite prosecutors recommending a 12-year term.
Prosecutors argued that Jarvis and Hamard misled JPMorgan into disbursing a nine-figure sum by falsely inflating data to suggest that Frank, a startup they co-founded, had 4.25 million student accounts, when in reality, the number was under 300,000.
Hamard faced similar charges but has not yet received a sentence.
The merger agreement from 2021, where JPMorgan acquired the student loan startup Frank, mandated the bank to cover the legal fees for co-founders Jarvis and Hamard.
Even after their dismissal and convictions, a Delaware court affirmed this requirement, stating that the indemnification clauses necessitated pre-payment of legal costs. As a result, JPMorgan is responsible for covering its expenses in various legal battles.
The bank is now looking to recoup these costs as part of a $287.5 million restitution order, which also encompasses other financial losses related to the merger.
Under this restitution order, Jarvis is only required to repay 10% of his income post-prison over 20 years, making it improbable that JPMorgan will gain back much of the funds.
Jarvis, 33, expressed taking “full responsibility” in court last month, but prosecutors dismissed her apology as insincere and self-serving.
Her legal team, led by Alex Spiro from Quinn Emanuel, is billing the bank at over $2,000 an hour and is expected to proceed with charges during the appeal process, despite ongoing reimbursement disputes.
The law firm representing Hamard did not respond to inquiries, and attempts to reach Spiro for comments have been made.
