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Excerpt: "In a story that should be getting lots of attention, American Banker has released an excellent and disturbing expose of J.P. Morgan Chase's credit card services division, relying on multiple current and former Chase employees. One of them, Linda Almonte, is a whistleblower whom I've known since last September."

Matt Taibbi at Skylight Studio in New York, 10/27/10. (photo: Neilson Barnard/Getty Images)
Matt Taibbi at Skylight Studio in New York, 10/27/10. (photo: Neilson Barnard/Getty Images)

J.P. Morgan Chase's Ugly Family Secrets Revealed

By Matt Taibbi, Rolling Stone

14 March 12


n a story that should be getting lots of attention, American Banker has released an excellent and disturbing exposé of J.P. Morgan Chase's credit card services division, relying on multiple current and former Chase employees. One of them, Linda Almonte, is a whistleblower whom I've known since last September; I'm working on a recount of her story for my next book.

One of the things we were promised by the lawmakers who passed the Dodd-Frank reform bill a few years back is that this would be a new era for whistleblowers who come forward to tell the world about problems in our financial infrastructure. This story now looms as a test case for that proposition. American Banker reporter Jeff Horwitz did an outstanding job in this story detailing the sweeping irregularities in-house at Chase, but his very thoroughness means the news may have ramifications for Linda, which is why I'm urging people to pay attention to this story in the upcoming weeks.

The Cliff's Notes version of the story goes something like this: Late in 2009, Chase's credit card services division sold a parcel of nearly $200 million worth of credit card judgments to a debt collector at a discount. This common practice in the credit-card industry is a little like a bookie selling the outstanding debts of his delinquent gamblers to a leg-breaker for 25 cents on the dollar. If the leg-breaker gets half the delinquents to pay, the deal works out for both sides - the bookie gets 25 percent of money he wasn't going to collect, and the leg-breaker makes a 100 percent profit.

In the case of credit cards, of course, you're selling the debts to collection agents, not leg-breakers, but aside from that unpleasantly minor distinction the process is the same. The most valuable kinds of sales in this world are sales of credit card judgments, in other words accounts in which the debtor has already been successfully brought to court. That, ostensibly, is what this bloc of accounts Chase sold in 2009 involved.

Almonte came to Chase in the summer of 2009 as a mid-level executive in the credit card services division's offices in San Antonio, and was quickly put in charge of preparing the documentation for this enormous sale of credit card judgments. When Chase regional offices from places like southern California and Illinois began sending in the papers for these "judgments," Almonte very soon found out that something was seriously wrong. From Horwitz's piece:

Nearly half of the files [Linda's] team sampled were missing proofs of judgment or other essential information, she wrote to colleagues. Even more worrisome, she alleged in her wrongful-termination suit, nearly a quarter of the files misstated how much the borrower owed.
In the "vast majority" of those instances, the actual debt was "lower that what Chase was representing," her suit stated.

Linda subsequently found an enormous range of errors. Some judgments, she told me, were not judgments at all. In some cases, she said, Chase actually owed the customer money.

When she brought these concerns to her superiors, what do you think their response was? They told her and others to shut up and just sell the stuff anyway. Her boss, Jason Lazinbat, allegedly told her "she had better go along with the plan to sell the misrepresented asset."

Think of the consequences of this: because Chase was so anxious to make money off this debt sale, countless credit card borrowers would now have collection agents chasing them for money they did not owe. The debt-buyer, too, was victimized by being sold accounts it could not collect on. It is almost impossible to estimate how many man-hours of pointless court proceedings would be lost because of this decision.

Anyway, when Linda refused to go along with the sale, she was fired. This was in November of 2009. She then went through a post-firing odyssey that is an epic tale in itself: her many attempts to get any of the major bank regulators interested in this case were disturbingly fruitless for a long time (although the Office of the Comptroller of the Currency is apparently looking into it now), and she struggled to find work in the industry.

She has been repeatedly harassed and has gone through all sorts of personal hardship as a result of this incident. She filed a whistleblower claim with the SEC as part of the new whistleblower program created by Dodd-Frank, but so far there's been no progress there.

When I met Linda last year, my first reaction to her story was that I was skeptical. The tale she told went far beyond the bank knowingly selling millions of dollars worth of errors into the financial system. She also recounted, firsthand, the bank's elaborate robosigning operation, which Horvitz, talking to other Chase employees, also discussed:

"We did not verify a single one" of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. "We were told [by superiors] 'We're in a hurry. Go ahead and sign them.'"

And there were other stories...suffice to say that the picture Linda painted of life inside Chase reminded me a little of Upton Sinclair's The Jungle: they were putting just about everything into those sausages. When I was writing it all up for my book I went through a period where I was waking up nights, seized with the urge to close every credit account I had – her story makes you think that most credit card companies are essentially indistinguishable from giant identity theft operations.

Again, though, when I first heard the story, I was skeptical – until I found other people in the company who verified Almonte's account, all the way down the line. Horvitz, too, found numerous employees in Chase's credit card services division who confirmed the story of the company knowingly selling a mountain of errors into the market, and manufacturing robo-signed documents to the tune of thousands per week.

The financial crash wouldn't have happened if even a slim plurality of financial executives had done what Linda Almonte did, i.e. simply refuse to sign off on a bogus transaction. If companies had merely upheld their own stated policies and stayed within the ballpark of the law, none of these messes could have accumulated: fraudulent mortgages wouldn't have been sold, families wouldn't have been foreclosed upon based on robo-signed documentation, investors wouldn't have been duped into buying huge packets of "misrepresented assets."

But most executives didn't refuse to go along, precisely because powerful companies make it so hard on people who come forward. Almonte, after being fired, entered into a modest settlement with Chase that prohibited her from coming forward publicly. At the time she entered into the settlement she was in an extremely desperate state, and she made a bad decision, taking a very bad deal.

Still, like Jeffery Wygand, the tobacco scientist from the movie The Insider, she was sitting on top of a story that, morally speaking, should not ever be protected by a confidentiality agreement - and the subsequent lack of regulatory action eventually moved her to speak out to people like Horvitz and me. Of course, now that her story is out there in public, the concern is that the bank will move swiftly to take her to court.

This person does not have any money, so an action by Chase at this point would be purely punitive, to send a message to future whistleblowers. They'll be more likely to do it if they think no one is paying attention. I'll keep you posted on that score.

In the meantime, please check out Horvitz's piece. It should give everyone who has a credit card pause. your social media marketing partner


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+84 # davidr 2012-03-14 15:52
Ha. Here's the pull-quote: "her story makes you think that most credit card companies are essentially indistinguishab le from giant identity theft operations."

I wonder what the stae of the law is in NY. Would managers who were paid bonuses based on valuations they personally knew to be false be subject to criminal prosectution?
+12 # Granny Weatherwax 2012-03-15 16:02
Add to that that about 90% of the money is actually wished into existence as credit lines by these private entities and you get a pretty good understanding of where, oh where does the wealth inequality come from.
+128 # walthe310 2012-03-14 16:16
For profit banks are amoral dinosaurs and deserve a quick and painful death. Let's switch to credit unions and co-ops.
+41 # Karlus58 2012-03-15 07:31
You Socialist! Kidding of course! Yes, imagine if we were to work collectively for each others benefit, not self-interest.
+30 # Texas Aggie 2012-03-15 11:49
Jim Hightower had a good article on how coops throughout the country in all sorts of lines of work are becoming more and more common. It is something to think about in just about any economic activity that you engage in.
+12 # Granny Weatherwax 2012-03-15 16:04
Yep! Competition is good, but cooperation is good too.
+138 # bluepilgrim 2012-03-14 18:29
And where is the Dept. of Justice and FBI in this 'gangtocracy'?

Oh, yeah, that's right -- they are chasing phantom 'terrorists'.
+50 # Ralph Averill 2012-03-15 03:53
That's the whole idea behind the "War on Terror". In the 80's, under Saint Reagan, they loudly banged the drum about flag burning, school prayer, and "freedom fighters" in Central America, while banking rules were quietly changed, "de-regulated", and the savings and loan banks were looted with junk bonds. The government bailout was hundreds of millions. Small potatoes compared to what was to come.
+23 # John Locke 2012-03-15 08:40
The Federal regulators just aren't interested in doing anything to protect the public, I wonder why! could it be that these banks own both parties, Obama included!
+18 # bugbuster 2012-03-15 10:23
DOJ and FBI only go after soft targets.
+6 # Cassandra2012 2012-03-16 15:45
Quoting bugbuster:
DOJ and FBI only go after soft targets.

Yes, why is Blagoyevich in jail, while war profiteers like Halliburton/Che ney , KBR, and Bechtel go scot-free? (?because Fitzpatrick is a Republican ?)
+31 # sean1303 2012-03-14 23:23
Another scam that I have experience both with Chase and Citibank: 1/3 of the way through a promotional 1-year 0% interest rate, I paid online, and then they "lost" the payment, and by the time I realized the problem (no notice was sent, of course) , I was in "default status" or something like that, and my interest rate went from 0 to 33% instantly.

The lesson here is always get a confirmation number and save it, every time you make an online payment.....The bigger lesson is stay away from Chase, CIti, Bank of America, Wells Fargo, etc. Get a credit card with your local credit union if you need one.
+26 # John Locke 2012-03-15 08:45
I had a different experience with JP Morgan, I had a credit card with Washington Mutual, never had a balance, when the statement came I always paid in full, When JP Morgan took over Washington Mutual the first thing they did was close my credit card account...
+32 # moby doug 2012-03-15 00:17
Bank of America has a similar predatory credit card culture, inspired the pirate formerly at the top: Ken Lewis.....I'm speaking from personal experience here. And then there are companies like Providian, that are even WORSE than BofA and Chase! Thing is, the banks have bought the Congressmen, Senators, Judges, regulators, laws, and regulations.... so what protection do we, the citizens, have? Without campaign finance reform, the financial & political rape of American citizens will inevitably continue.
+28 # Andrew Hansen 2012-03-15 04:54
Between (Goldman Sachs former employee) Greg Smith's letter in the NYT and the American Banker piece, maybe some traction on this front. Yes the two are slightly different layers of the onion--invesmen t banking and credi card services--but the corrupted culture is of the same root.

I look forward to Matt's book on Ms. Almonte.
+8 # Granny Weatherwax 2012-03-15 16:11
The main difference is that credit card services loan the money out at interest while investment banks loan the money to themselves to buy the real economy.
+35 # Peace Anonymous 2012-03-15 05:55
Where is the line? We live in a world where nothing seems to matter anymore but money. Politicians are for sale. And we invade countries, overthrow governments, and kill innocent civilians to steal their resources.
How much longer can we continue in this direction? The only thing that will change this is the will of the people.
+31 # MainStreetMentor 2012-03-15 06:24
We can bet, too, that BofA, Citigroup and Wells Fargo are up to their ears in the same processes. The Whistle-Blowers MUST be protected from prosecution if the kinds of unethical and illegal internnal banking/collect ion processes are to be fully investigated and subsequently prosecuted in our court system. Where are our legal prosecutors, and why aren't they demanding investigations ...?
+16 # HowardMH 2012-03-15 08:45
Obama the Wimp. Wall Street Banks Investigation
Isn’t Department of Homeland Security (DHS) part of the “GOVERNMENT”. Why should we be the least bit surprised about the DHS wanting to squash Occupy Wall Street (OWS).
During the Savings and Loan mess 15 or so years ago there were over 1000 agents assigned to investigate, and over 1000 Felony convictions. The Current Economic Crisis (Wall Street Mess) is according to MSNBC Dylan Ratigan Show on 27 Feb 2012, 70 times larger, so doing the math, there should be many many Thousands of FBI Agents assigned, not the 120 that have assigned since 2007. So far there has been ZERO Elite Felons convicted. Have you figured out yet that Obama the Wimp is totally bought and paid for by Wall Street?
OWS is a thorn in the “GOVERNMENT’s” side and they want it GONE!

Go 99ers Go!

The NY State AG is the one handling it, but looks like his hands have been tied behind his back and he has been blindfolded.
+21 # economicminor 2012-03-15 09:06
yes but again, where is the real opposition?

the other party is up to its neck in vaginas and obfuscation.

And the Occupy WS bill was passed almost unanimously and already signed by the prez.. What happened to the oath to defend and protect the US Constitution?
+28 # 1984 2012-03-15 08:50
I cannot possible tell the myriad of events I went through due to credit card frauds in this little space. Mortgage companies too. Inevitably after about a year I would get a bill claiming I had not paid...and had to spend time dealing with it.
Anyway, the expert on credit card fraud and tricks is Elizabeth Warren, from whom I first learned of these purposeful tactics (i.e. fraud) they use to get more money, late payments ya ya ya. And steal hours and hours and hours of your time to correct. They are counting on your not bothing due to the time they MAKE it take including (according to Ms. Warren) PURPOSELY disconnecting the phone when you are calling in !!!!!
+17 # Eliza D 2012-03-15 11:09
The huge dragon in the dungeon is that the lords of this realm and their financial advisors get rich by trading commodities without real value (such as credit default swaps)and charging fees to the peasants (we working stiffs), and according to Greg Smith, shamelessly laughing over their foie gras.Join Occupy!
+11 # video4315 2012-03-15 15:44
Don't forget that legislation when W was the Prez protected the banks from being hurt when personal bankruptcy was declared. The credit card debts (and student debts) don't go away. The bankrupt person still owes the money. Credit cards are very similar to permanent servitude. We do it to ourselves, but the banks do their very best to lure us into it.
+8 # Sreditor 2012-03-15 16:47
Chase inherited me from Washington Mutual and in short order was charging me for unspecified purchases. I had to sue to make them go away, and they only emptied my black bag when I agreed not to publicize their misdeeds. It was cowardly to agree, but I ain't no hero.

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