WASHINGTON -- A public interest group on Monday sued the Justice Department over last year’s record $13-billion settlement with JPMorgan Chase & Co., arguing the deal to resolve investigations into faulty mortgage investments was unconstitutional because courts did not review it.
Better Markets Inc., which has been critical of Wall Street and regulators in the aftermath of the financial crisis, filed the suit in U.S. District Court in Washington, D.C.
The nonprofit group said that Atty. Gen. Eric H. Holder and other top Justice officials should not have been allowed to give JPMorgan “blanket civil immunity for years of alleged pervasive, egregious and knowing fraudulent and illegal conduct that contributed to the 2008 financial crash and the worst economy since the Great Depression."
"The bailouts and suffering of the American people in 2008 and 2009 were bad enough," Dennis Kelleher, president of Better Markets, told reporters at a news conference.
"It’s too much to ask taxpayers and the American people to put up with a secret backroom deal that might well be another sweetheart deal for yet another big Wall Street bank," he said.
After negotiations that included Holder and JPMorgan Chief Executive Jamie Dimon, the bank agreed in November to the largest settlement ever by an American company.
The deal included a $2-billion civil penalty and $4 billion to help struggling homeowners nationwide. JPMorgan admitted to knowingly selling toxic mortgage-backed securities that helped cause the subprime housing bubble and the financial crisis that followed.
The settlement did not resolve a criminal investigation into JPMorgan's activities that is being conducted by the U.S. Attorney's office in Sacramento.
Kelleher said it was unconstitutional for a settlement of that size to be completed without judicial review.
He questioned whether the $13-billion payment by JPMorgan was enough to offset the damage caused to the economy and said there wasn't enough information in the settlement to determine if it was fair.
"You can't cut that deal and cut out the judicial branch of the government," Kelleher said.
Kelleher said the suit was novel and predicted it would be hotly contested.
A Justice Department spokeswoman did not immediately return a request for comment.
The JPMorgan settlement also has been criticized because a large part of the payment is tax deductible. Lawmakers have introduced legislation prohibiting the ability of companies to get deductions for penalties paid as part of government settlements.