Pension systems, NY firm to settle

State’s teachers set to get $60,000

JPMorgan Chase & Co. has agreed to pay $150 million to settle investor claims that it hid from them as much as $6.2 billion in losses caused by a trader dubbed the London Whale.

A group of pension funds, including the Arkansas Teacher Retirement System, accused JPMorgan of turning its chief investment office in London into a “secret hedge fund” that caused the losses. The bank told investors that the office’s primary role was managing risk when in fact it was engaging in trades to generate profit, they said.

The settlement “reflects a reasonable compromise concerning the merits of lead plaintiffs’ claims” and “the obstacles to prevailing at trial,” the pension funds said in a filing seeking court approval of the deal.

Plaintiffs in the case claim they incurred tens of millions of dollars of losses because their fund managers were given “false and misleading information.” Bruno Iksil, who amassed positions in credit derivatives so big and market-moving that he became known as the London Whale, made the trades for the bank.

Joe Evangelisti, a JPMorgan spokesman, declined to comment on the accord. The settlement was described in court papers Friday in New

York.

George Hopkins, director of the Arkansas Teacher Retirement System, said he believes the system lost $3 million in the scheme, but a judge readjusted the amount of time over which the illegal activity occurred. So the retirement system is now expected to get back just over $60,000. Hopkins said he won’t know for sure until the settlement has made its way through all the shareholders and regulators, and that could take another two years.

“This was a case where a part of JPMorgan that had a function of reducing and minimizing risk to investors … was actually creating a massive amount of risk,” Hopkins said.

The perceived $3 million loss, over a period between 2010 and 2012, “caught our attention,” he said.

“We’re trying to get some of our money back, and we would like for groups like this to know that this kind of behavior is not allowed and that they will ultimately have to pay money for this kind of behavior,” Hopkins said.

The complaint was filed on behalf of JPMorgan shareholders who bought stock between Feb. 24, 2010, when the company filed its 2009 earnings report with regulators, and May 21, 2012, when the bank announced it was halting a $15 billion share buyback program until it could control the losses.

The Ohio Public Employees Retirement System, the state’s largest public pension fund and one of the largest in the U.S., lost $2.5 million.

“Misleading investors with

wrong or incomplete information is unacceptable and causes real damage,” Ohio Attorney General Mike DeWine said in announcing the agreement. “Ohio’s pension funds, like all investors, expect companies to provide accurate information so they can appropriately judge the risk of an investment. I am pleased that Ohio has reached this settlement to help recover investment losses for our OPERS pension system members and also discourage future fraud.”

In July, the U.K. Financial Conduct Authority abandoned efforts to pursue a fine of about $1.5 million and an industry ban against Iksil. The former trader signed a nonprosecution agreement that prevents him from being charged by U.S. prosecutors in exchange for his cooperation.

Iksil’s former boss, Javier Martin-Artajo, and a junior trader, Julien Grout, were indicted in the U.S. in 2013. Prosecutors alleged the pair committed securities fraud by hiding the true extent of the losses from bank management.