You can place the top executives of JPMorgan Chase & Co. high on the list of people who wish they had never heard the name Jeffrey Epstein.
The giant bank has been struggling for years with accusations that it was complicit with Epstein’s horrific criminal record of sex trafficking and sex slavery.
For the record:
5:20 p.m. Sept. 26, 2023An earlier version of this article incorrectly identified Leslie Wexner as the founder of Victoria’s Secret. He was its owner.
7:48 a.m. Sept. 26, 2023Shortly after this column was published, JPMorgan Chase and the U.S. Virgin Islands announced a settlement in which the bank will pay $75 million to the Virgin Islands to resolve the territory’s lawsuit. The settlement includes $55 million for efforts to combat human trafficking and augment law enforcement on the islands, and $20 million in lawyers’ fees. The bank said it also reached a confidential settlement with former executive James “Jes” Staley.
In June, for example, the company agreed to pay $290 million to settle a class-action lawsuit with potentially more than 100 plaintiffs claiming they were Epstein’s victims.
Cash was the lifeblood of Epstein’s operation.
— U.S. District Judge Jed S. Rakoff
In doing so, the bank acknowledged that its association with Epstein “was a mistake and we regret it,” JPMorgan spokeswoman Patricia Wexler told me by email. “We would never have continued to do business with him if we believed he was using our bank in any way to help commit heinous crimes.”
The statement continued, “We all now understand that Epstein’s behavior was monstrous, and we believe this settlement was in the best interest of all parties, especially the survivors, who suffered unimaginable abuse at the hands of this man.”
In settling, however, JPMorgan didn’t admit liability for Epstein’s crimes. You can judge for yourself whether $290 million isn’t a handsome settlement in a case in which a defendant denies liability, even for a bank as big as JPMorgan, which reported a profit of $37.7 billion last year on $128.7 billion in revenue. (The agreement is awaiting final approval from U.S. District Judge Jed S. Rakoff.)
That settlement left JPMorgan still facing a possible reckoning in federal court due to a lawsuit brought by the U.S. Virgin Islands, a Caribbean territory where Epstein owned an island reportedly used as a trafficking site.
The bank finally disposed of that threat Tuesday, when it reached a $75-million settlement with the territory, including $55 million that will be used to augment the islands’ law enforcement capabilities and help charities devoted to assisting crime victims. Of the total, $20 million will go to lawyer fees.
The territory brought the suit, says Ariel Smith, its attorney general, to “put Wall Street’s executives on notice that they can no longer profit from or participate in human trafficking, and they must report its signs as federal law requires. Simply put, children’s safety depends on Wall Street executives following the law.”
The law at issue is the federal Trafficking Victims Protection Act of 2000, which aimed to ease the prosecution of slavery in all forms to prevent the practice and protect potential victims.
The Virgin Islands asserted that JPMorgan — and Deutsche Bank, which took on Epstein as a client after Morgan dumped him in 2013 — obstructed the law, in part by failing to promptly file “suspicious activity reports” with banking authorities; had the banks followed the rules, the territory says, government authorities might have been alerted to Epstein’s crimes much sooner than they were.
The territory originally sought a penalty of at least $150 million to give JPMorgan, not to mention other banks, the economic incentive in the future “to place compliance with the law and prevention of trafficking ahead of its own profits,” Smith said.
According to documents unearthed by the Virgin Islands during pretrial discovery, those profits were copious. The territory said it could prove that JPMorgan collected $40 million in fees through its relationship with Epstein, including $20 million from Epstein himself and another $20 million from clients he brought the bank, including Google co-founder Sergey Brin, Bill Gates and Leslie Wexner, the founder of the Limited. (A spokesman for Gates says he never became a client of JPMorgan.)
That points to the main issue here: bringing financial institutions to book for facilitating wrongdoing by their clients.
This is not the first time that JPMorgan has been accused of allowing criminal activities to take place in front of its eyes. In 2014, the bank paid a $1.7-billion federal penalty and was forced to admit its responsibility for allowing Bernie Madoff to conduct his Ponzi scheme as a bank client.
“JPMorgan, because of its unique vantage point as [Madoff’s] banker, had reason to be suspicious about Madoff,” then-U.S. Atty. Preet Bharara of New York said at the time. Its own bankers had noticed that Madoff’s trading and profit claims were suspect, but it never informed government regulators and failed to file a suspicious activity report that would have alerted the authorities.
Morgan is not necessarily alone in turning a blind eye to wrongdoing by its clients. Banks and other financial institutions have the vantage point that Bharara spoke of that would expose scams and schemes before they could victimize innocent people if the banks would only speak up. Instead, it’s all too common for these institutions to act as though they’re mere conduits for financial transactions, rather than crucial players — participants in all but name.
That’s certainly the case with Epstein, who died in police custody, apparently by his own hand, in 2019 while facing federal sex trafficking charges.
“Cash was the lifeblood of Epstein’s operation,” Judge Rakoff observed in May in explaining his decision to allow the lawsuits by the Virgin Islands and the Epstein victims to go forward against JPMorgan and Deutsche Bank. The cash, it goes without saying, passed through the banks’ fingers.
JPMorgan’s $290-million settlement and a separate $75-million agreement by Deutsche Bank will close the victims’ cases, assuming Rakoff approves them.
The crux of JPMorgan’s defense against the Virgin Islands lawsuit was that the wrongdoing was perpetrated by one individual. That’s James E. “Jes” Staley, who in a 33-year career with the bank rose to become chief executive of its corporate and investment banking unit and an oft-mentioned successor to Chairman and CEO Jamie Dimon.
Staley, who left JPMorgan in 2013 and subsequently became CEO of Barclays Bank, had earlier been CEO of Morgan’s asset management business. That purportedly first brought him into contact with Epstein, who became a highly valued client. Staley resigned from Barclays in 2021, after British authorities concluded that he hadn’t given them a complete picture of his relationship with Epstein.
Their conclusion resembles JPMorgan’s argument. The bank says that Staley never told anyone there “that he had witnessed, was aware of, or participated in” Epstein’s sex trafficking.
Why, the bank says, Staley even signed the bank’s code of conduct every year, in which he agreed to meet its “highest ethical standards,” comply with all legal and regulatory requirements, and refrain from any conduct that could “reflect adversely” on his employer. In other words, don’t blame JPMorgan.
If there’s a better indication that corporate codes of conduct are designed more to shield corporations from legal liability than to hold their employees to the highest ethical standards, I can’t imagine it.
The bank sued Staley in March, accusing him ofconcealing what he knew about Epstein; Staley said that although he was friendly with Epstein, he knew nothing about his crimes. (The bank announced a settlement with Staley Tuesday, on confidential terms.)
For all that, Morgan’s defense warranted a handful of, shall we say, quibbles.
First and foremost, Epstein’s criminality was no secret to JPMorgan or anyone else in the world, certainly not after 2006, when Epstein was charged in Florida with soliciting an underage prostitute; he pleaded guilty in 2008 and was sentenced to 18 months in jail and served more than a year.
By then, he had been sued twice for $50 million each by anonymous plaintiffs who accused him of keeping them as sex slaves. Both cases were dismissed, but they painted a picture of a sex maniac who kept young women for his own pleasure and that of well-placed friends. Further allegations were aired in the press during the ensuing years.
Internal JPMorgan emails obtained by the Virgin Islands in pretrial discovery revealed that compliance executives at the firm’s private bank unit, which handled the richest clients, were becoming increasingly agitated over the bank’s relationship with Epstein.
The executives were fully alive to the nature of his activities and repulsed by the bank’s role in funneling cash from his accounts to women identified as his “friends,” in sums of tens of thousands of dollars at a time. A huge portion of these payments, they noted, went to women with Eastern European names, a red flag for human trafficking investigators.
They were especially concerned because the bank was leading an anti-human trafficking initiative in the banking industry, from which it hoped to garner some positive PR.
One compliance officer wrote to another in 2010 about his fear that the bank’s “touting of good will on [human trafficking]” would fall flat if critics pointed out that JPMorgan was the bank for “Epstein, a known child sleaze.”
Although bank policy required account managers to obtain explanations from clients for large cash withdrawals and “assess the plausibility of these explanations,” Epstein’s contacts at JPMorgan waved his explanations through, even when they were transparently absurd.
Asked about a string of withdrawals of $20,000 to $40,000 at a time, Epstein explained them as “fuel payments in foreign countries” for his private plane. Yet at the time he was under house arrest and not permitted to travel abroad.
Epstein’s behavior, including his predilection for sex with minors, was so well known around the JPMorgan water cooler that it became a running joke in the office. After visiting the house of another client, a top executive of the bank’s asset and wealth management unit reported to the unit’s chief executive that it “reminded me of JE’s house, except it was more tasteful, and fewer nymphettes.”
The compliance executives’ pleas for JPMorgan to drop Epstein as a client were consistently rejected by his bankers, who were more concerned with toting up the money he brought in as one of their most valuable customers.
According to the documents obtained by the Virgin Islands through discovery, in 2003 Epstein accounted for $8 million in revenue for the wealth management unit, nearly twice the amount coming from the unit’s second-largest client. He was also valued for his connections, which brought new ultrarich clients to the bank.
But Morgan did not “fire” Epstein as a client until 2013, after Staley, who had become his chief contact at the bank, had departed.
It’s entirely fair to say that Epstein would have been brought to justice well before July 2019, when he was arrested on federal sex-trafficking charges, if JPMorgan merely told authorities what it knew and provided them with the documentation of his financial transactions that the bank held in its possession.
That these were “suspicious” as defined by the federal disclosure law is hardly subject to question, since so many of the bank’s own executives knew it. Instead, they kept him on as a valued client until the relationship became utterly untenable. So let’s be clear: As an institution, JPMorgan knew what Epstein was up to and let dollars do its thinking about it.
Will the millions of dollars the bank will have to shell out because it turned a blind eye to Epstein keep it from making the same mistake again? We won’t know unless another scandal erupts — or, more likely, until it erupts.
House Democrats urge probe of L.A. hotels for ‘potentially predatory behavior’ toward migrant workers
A group of federal lawmakers is urging the U.S. Department of Labor and the Federal Emergency Management Agency to investigate some prominent Los Angeles hotels and their contracted staffing agencies for possible labor violations in their treatment of migrant workers.
Local hotels — or staffing agencies operating on their behalf — may have engaged in “potentially predatory behavior” toward unhoused refugees from Venezuela and Colombia hired to work at their properties, House Democrats said in a letter sent on Monday to the federal agencies. The letter named hotels including Le Meridien Delfina Santa Monica, the Four Points by Sheraton, the Holiday Inn LAX, and the Pasadena Hilton.
The letter cites reporting by The Times on recent migrants living in a Skid Row shelter recruited to work at unionized hotels in Santa Monica and near Los Angeles International Airport where employees had gone on strike. Some hired appeared to be among hundreds of migrants shipped on buses to L.A. this year by Texas Gov. Greg Abbott. Migrant workers hired as temporary replacements said they were assigned heavy cleaning loads and long hours; some were not told how much they would be paid or given breaks.
“The reported exploitation of vulnerable migrant workers to undermine hotel workers’ efforts to win livable wages and other improvements in labor standards is deeply troubling,” lawmakers said in the letter.
Among the 27 congressional members who signed are House Democrats from L.A. and Orange counties, as well as others representing California districts. They include Robert Garcia (D-Long Beach), Jimmy Gomez (D-Los Angeles), Sydney Kamlager-Dove (D-Los Angeles), Ted Lieu (D-Torrance), Katie Porter (D-Irvine), Adam B. Schiff (D-Burbank) Maxine Waters (D-Los Angeles), Ro Khanna (D-Fremont) and Barbara Lee (D-Oakland). Two Arizona representatives also signed.
The letter, addressed to Acting Labor Secretary Julie Su, administrator Jessica Looman of the Labor Department’s Wage and Hour Division, and Deanne Criswell, administrator of the Federal Emergency Management Agency, requests that the two agencies look into potential violations of federal labor law, including the Fair Labor Standards Act, or other statutes that seek to protect recent migrants and refugees from exploitation.
The letter also asks the Department of Labor and FEMA to help “vulnerable newcomers who may have been exploited during the ongoing labor dispute” to secure better housing and employment.
In the Oct. 23 Times report highlighted in the letter, 11 people living at Union Rescue Mission on Skid Row confirmed they had been hired at hotels where employees were protesting outside. Many did not provide their names, fearing repercussions from immigration authorities.
One migrant worker interviewed was a minor who had skipped school to work at the Holiday Inn LAX. Aimbridge Hospitality, which operates the hotel, at the time did not respond to questions about whether staffing agencies it used had secured appropriate permits to employ minors.
The agency that paid the minor and his mother was Arya Staffing Services, which also appears to operate under the name AV Professional Services. Alinne Espinoza, who is listed as the registered agent for the staffing agency, had said, when approached for comment, that her business is properly licensed and operates legally.
Payments made to the migrant workers by the staffing agency that The Times reviewed did not appear to make payroll deductions required by companies to pay taxes and other contributions.
The office of Los Angeles County Dist. Atty. George Gascón announced in October that it would launch an investigation into working conditions for migrants hired at hotels — including potential wage theft and violations of child labor law — based on information brought to him by Unite Here Local 11, the union representing hotel employees, and Times reporting.
This L.A. firm hired kids to debone poultry with sharp knives, drive fork lifts, Labor Department says
A Southern California poultry processor illegally employed children as young as 14 to debone meat with sharp knives and move pallets with power-driven lifts, the Labor Department said.
The poultry processor, which supplies grocery stores including Ralphs and Aldi, must pay nearly $3.8 million in fines and back wages after an investigation found the company employing children as young as 14 in dangerous jobs, retaliating against workers who cooperated with investigators and refusing to pay overtime wages, the agency said.
The Labor Department alleged that Exclusive Poultry Inc. and other companies owned by Tony Elvis Bran employed children who used sharp knives to debone poultry, operated power-driven lifts to move pallets and worked more hours than are allowed under child labor laws.
The company also allegedly cut the wages of workers who cooperated with investigators and did not pay workers proper overtime, according to the agency.
“Exclusive Poultry and owner Tony Bran willfully withheld workers’ hard-earned wages, endangered young workers and retaliated against employees to conceal their wrongdoing,” said Jessica Looman, administrator of the Labor Department’s Wage and Hour Division, which investigated and litigated the complaint.
When reached by phone, Bran said he didn’t know if he was allowed to speak about the case and had to ask his lawyer if he could comment.
The Labor Department said its investigation included two poultry plants in City of Industry and La Puente controlled by Bran, and that he set up “front companies” to employ workers at these plants. Those company names are Meza Poultry, Valtierra Poultry, Sullon Poultry Inc. and Nollus’s Poultry.
Bran, the companies and the listed owners of the front companies are now subject to a consent judgment that prevents them from violating labor laws, including paying workers less than minimum wage, paying inadequate overtime costs and allowing children under 16 to work too many hours.
The companies are also prevented from shipping any poultry that was produced in violation of labor laws governing minimum wage, overtime pay and child labor, or from any location where Labor Department investigators saw child labor occurring.
Bran and Exclusive Poultry will also be monitored for three years to ensure compliance, and workers who were fired from the plants after the investigators’ plant visit will get preferential hiring for any open positions, the Labor Department said.
The company supplied Ralphs, Aldi, Grocery Outlet and Sysco, among other companies, according to the Labor Department.
Grocery Outlet said it has never used Exclusive Poultry as a supplier, nor has it used any of the other companies associated with the Labor Department’s investigation.
Sysco said that the findings of the Labor Department’s investigation of Exclusive Poultry represent “serious violations of legal and regulatory requirements and are inconsistent with the ethical standards outlined in Sysco’s Supplier Code of Conduct.” The food distributor said it was “evaluating the situation” and would take “appropriate remedial actions” to ensure its suppliers uphold company standards on labor and food safety.
Aldi and Ralphs owner Kroger didn’t respond to a request for comment.
It’s been the year of the worker. West Hollywood employers are so over it
Across the country, many American workers have enjoyed pay hikes unlike anything seen in decades. And for many American businesses, this also has been a good year for profits, with some corporations notching record or near-record gains.
But don’t try to sing that song of good times in West Hollywood: Business owners there say that paying workers more is killing them, and that goes for some of the low-wage workers that many liberal policymakers worry about.
In an area known for its nightlife, hip restaurants, trendy shops and boutique hotels, workers at or near the minimum pay abound. And, thanks in part to the political muscle of L.A.’s hotel union and the COVID-era shakeup that gave workers greater leverage, city leaders there have approved the highest minimum wage and some of the most generous paid time off to be found anywhere in the country.
The West Hollywood rules, approved two years ago, stand in contrast to the situation in much of the country, where business leaders have successfully opposed substantial increases in minimum wages. The federal wage floor has been stuck at $7.25 an hour since 2009, and two dozen states currently are at less than $10 an hour or have no minimum wage at all.
In California as a whole, the minimum wage stands at $15.50 an hour, behind only Washington state at $15.74 and the nation’s capital at $16.50.
Many cities have their own minimum rate, and none higher than West Hollywood, where it’s now $19.08 an hour, with paid leave even for part-time staff.
Economists have long argued over what effect minimum wage rules have on jobs. Conservatives have generally maintained that requiring higher minimum pay leads employers to reduce hiring. Liberal economists have denied such a link in all but theory and some rare exceptions.
For restaurateur Craig Susser and other employers like him, that theoretical point of no return has been reached in West Hollywood. Susser, the owner of Craig’s and Craig’s Vegan, said he has reduced the number of servers from 12 to nine, sometimes eight. Other employers have cut worker hours. Many have jacked up their prices.
And by the city’s count, a sizable 177 businesses have closed since 2021, although exit interviews suggest a multitude of reasons, including labor costs, but also inflation more broadly and challenges posed by leases, entertainment industry strikes and changes in consumer behavior post-COVID crisis, according to Laura Biery, West Hollywood’s economic development director.
Things have gotten so desperate, some employers say, that in a year when picketing workers have become commonplace and autoworkers, screenwriters and health workers have struck for significant gains, in West Hollywood, it’s bosses who’ve been holding up signs and marching in protest.
“For God’s sake, give us a break,” said Genevieve Morrill, president of the West Hollywood Chamber of Commerce.
Until relatively recently West Hollywood had followed the state’s minimum wage, which has been rising every year since 2017, mostly by a dollar at a time, to its $15.50 level today.
But that all changed at the start of 2022. Since then West Hollywood’s wage hikes have been extraordinary — more than $6 an hour for small businesses and $5 for larger ones in a span of just 2½ years.
Even some liberal economists are cringing a bit. “That’s such a substantial increase,” said Harry Holzer, a Georgetown public policy professor and the Labor Department’s chief economist in the Clinton administration. He added that bigger increases matter more in the long haul.
West Hollywood businesses are having an even harder time swallowing the city’s paid time off rule that was part of the minimum wage ordinance. That requires employers to provide 12 days of compensated leave per year for full-time employees, at least half in vacation or personal time off and the rest in sick leave.
Part-timers also qualify on a prorated basis. And upon separation, all employees must be paid for unused vacation or personal leave, something neither the state nor any other city is thought to mandate.
Labor proponents have argued that even $19 an hour isn’t enough to live in expensive L.A. and that the rapid jump in West Hollywood’s minimum wage came after years in which its pay rate trailed that of Los Angeles and neighboring cities. Now, “it’s on the cutting edge of this important debate” over living wages, said Danielle Wilson, political coordinator of Unite Here Local 11. The union has been striking hotels across Southern California since summer and had an influential role in pushing through the West Hollywood pay increases.
Wilson said businesses in West Hollywood can afford it. And some certainly can. Many workers were already making $19 or more an hour, thanks to the labor market upheaval and tight worker supply caused by the pandemic.
Nor has it stopped new startups. This year more businesses have opened in West Hollywood than have closed, records show. Mario Vollera and his partners are gearing up to open Southern California’s second Roosterfish bar in West Hollywood, in the space where reality TV star Lisa Vanderpump had once operated her restaurant lounge. “I’m not that concerned,” he said of West Hollywood’s pay rules.
The city of about 35,000 is part of L.A.’s affluent Westside, home to the Sunset Strip, and its area of 1.9 square miles is chock-full of swanky bars, dance clubs and celebrity hideaways. But although a sliver of West Hollywood touches Beverly Hills, the cities are quite different in demographics and wealth. West Hollywood’s residents are more transient and household incomes and housing values aren’t far off from L.A. County’s averages, census data show. Most workers are employed by small service employers.
The irony is that a Starbucks in West Hollywood now has to pay its employees at least $19.08 an hour, but another one down the road on Sunset Boulevard in Beverly Hills could, at least legally, bring on a worker at the state’s minimum of $15.50. (The current minimum wage for the city of L.A. is $16.78, and it’s $16.90 for Santa Monica.)
“Beverly Hills is actually looking pretty competitive and cheaper than West Hollywood,” said the chamber’s Morrill, letting out a chuckle.
She said it’s doubly hard for employers because the city’s socially progressive history and support for labor have made them reluctant to stick their heads out and complain publicly.
“I’m definitely in support of people making more money,” said one longtime restaurant owner who asked that he remain anonymous. “But it’s going to end up hurting the people it’s intended to help.”
This business owner was one of 21 employers that received a temporary exemption from the paid-leave rules, after supplying proof that the rules would lead to a substantial cut in staff or work hours.
Other employers and their supporters, about 30 in all, took to the streets on Thanksgiving week and marched to West Hollywood’s city hall. Their demands: a long pause on future minimum wage increases; a new minimum rate for tipped employees, some of whom employers say make much more than a living wage; and a rescission of the paid leave provision for part-time employees.
West Hollywood’s City Council responded by giving employers relief on an annual business tax and parking and outdoor dining fees, totaling about $2.5 million, and said it would conduct a survey of businesses and consider amendments, but it made no time commitments.
Just how West Hollywood became, almost overnight, the minimum wage leader in part reflects a labor revival after decades of stagnant incomes and pandemic-induced anger that manifested itself in the Great Resignation and worker shortages. Low-wage workers have seen the biggest gains.
West Hollywood labor had a powerful ally in Local 11, which maximized the moment by using its broader political leverage to lean on city officials, according to knowledgeable sources. And what initially began as an effort targeting hotels morphed into an expansive ordinance that passed on a late November 2021 night.
Employers say they were blindsided by the new rules. And while experts say that the changes, on the whole, may not make a big difference for employment, they could for businesses on the margins. More than many others, West Hollywood depends on hospitality businesses, which are labor-intensive and tend to come and go. Some say they may move or expand elsewhere. Others may adopt labor-saving strategies, such as more automation, or simply make do with fewer employees.
“People think of it as a free lunch, but you have to pay for it somewhere,” said David Neumark, a UC Irvine economist who has long studied the effects of minimum wage increases.
“The workers who get higher wages and keep their jobs and hours — they’re better off,” he said. “It’s workers who lose their jobs and hours. There’s the tradeoff.”
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