Today, financial reporter David Dayen argues in Salon that JPMorgan Chase CEO Jamie Dimon has committed an offense that could carry with it a sentence of up to 20 years in prison…
The crowd waited impatiently outside 270 Park Avenue, corporate headquarters of JPMorgan Chase. Photographers readied their cameras. Then, the murmuring grew into a low roar. There was CEO Jamie Dimon, accompanied by two FBI agents. His hands were tied behind his back, held together by handcuffs. As flashbulbs popped, the agents guided Dimon into an awaiting vehicle, and drove off to take him into police custody.
Christmas miracle? It doesn’t have to be. Even putting aside the rap sheet of crimes committed by JPMorgan Chase over the past several years for which its CEO can be said to be ultimately responsible, just a week ago, Jamie Dimon explicitly violated a federal statute that carries a prison sentence. That he’s a free man today, with no fear of prosecution, doesn’t only speak to our two-tiered system of justice in America. It should color our perceptions of new rules and regulations that supposedly “get tough” on the financial industry, as we recognize that any law is only as strong as the individuals who enforce them.
The law in question that Jamie Dimon violated, by his own admission, can be found in Section 906 of the Sarbanes-Oxley Act. In the aftermath of the 2001 financial crisis, when corporations like Enron and WorldCom melted down in accounting scandals, Congress passed and George W. Bush signed Sarbanes-Oxley, meant to reform corporate accounting and protect investors through additional disclosures.
Section 906 forces corporate CEOs and CFOs (chief financial officers) to add a written certification to every periodic financial statement filed with the Securities and Exchange Commission. In this certification, the CEO and CFO must personally attest that the documents submitted to the SEC are accurate, as well as that the corporation has adequate internal controls. That phrase “internal controls” has a very specific meaning, covering the accuracy of all financial reporting, proper risk management, and compliance with all applicable regulations. Under Section 906, if the CEO or CFO knowingly or willfully make false certifications – i.e., if they know the SEC filing contains inaccurate information, or that the company’s internal controls are inadequate – they face fines of up to $5 million, and imprisonment of up to 20 years.