Former JPMorgan employee sues regulator over ‘London Whale’ report

by 03 Jun 2016
A former JPMorgan Chase & Co. trader who was indicted in relation to the London Whale’s losses became the latest banker to go to court over claims a U.K. regulator improperly identified him in a report about the scandal.

The Financial Conduct Authority failed to properly anonymize Julien Grout in a penalty notice accompanying a 138 million-pound ($199 million) fine against the bank in 2013, Richard Lissack, his lawyer, told a London court Thursday. The FCA’s attempt to disguise Grout by referring to the 37-year-old as the "traders on the SCP"-- synthetic credit portfolio desk -- was insufficient because Grout was one of only four traders on the desk, Lissack said.

"There is no doubt whatsoever that Mr. Grout was one of the traders on the SCP," Lissack told the court. "Once the group, the collective, is identified, and it is, and once it is established that an individual is a member of the identified collective," anonymity is lost.

JPMorgan was fined more than $1 billion by U.S. and U.K. regulators in 2013 after trader Bruno Iksil, known as the London Whale because of his large bets, incurred $6.2 billion in losses. Grout and Iksil’s former boss, Javier Martin-Artajo, were indicted in the U.S. in 2013 over allegations the pair hid the true extent of the losses from bank management.

Earlier Suits
The suit is the latest against the FCA over improper identification in settlements. The FCA lost a landmark appeal last year in relation to a colleague of Grout’s, Achilles Macris, the manager of the London Whale trader at JPMorgan. The FCA will take the case to the Supreme Court in October.

"Relevant readers would not have understood references to ‘traders,’ either generally or in any particular case, to concern Mr. Grout specifically," Paul Stanley, a lawyer for the FCA countered in court documents. "They would have been understood as generic references to an ill-defined group which might or might not have included Mr. Grout."

The court must decide first whether Grout is identifiable in the notice and, if he is, whether he has been criticized. If the court rules in Grout’s favor on both points, he will have the chance to respond to the FCA’s allegations. The judge will probably issue a ruling in the next few weeks.

Grout has been able to avoid facing the U.S. charges by remaining in his native France, which doesn’t extradite its citizens. A Spanish court rejected a request to force Martin-Artajo to go to the U.S. as well.

Iksil, who left the bank in 2012, has been able to escape the scandal largely untouched by regulators. The U.S. decided not to prosecute him after he agreed to testify against colleagues and the FCA abandoned a proposed fine of about 1 million-pounds.

In a letter earlier this year, Iksil said the inaction by regulators helped show he wasn’t to blame.

Bloomberg News