ILNews

Church accuses JPMorgan of mismanagement, self-dealing

Back to TopCommentsE-mailPrintBookmark and Share

Christ Church Cathedral in Indianapolis has filed a federal lawsuit against JPMorgan Chase, alleging the bank's "intentional mismanagement" and "self-dealing" led to $13 million in losses in church trust accounts endowed in the 1970s by Eli Lilly Jr.

The church, which occupies the oldest structure on Monument Circle, said the bank from 2004 to 2013 invested its money in 177 different investment products, including "high-risk, high-cost, opaque, unsuitable and poorly performing investments."

Between 2004 and 2007, the value of church trusts managed by the bank ranged from $35.4 million to $39.2 million. By December 2013, after the stock market had shot higher, the trust's value had dropped to $31.6 million.

Meantime, the bank's fees increased 475 percent. The suit notes that the church's annual fee to JPMorgan rose from an average of $35,000 to $177,800. The church has paid more than $1 million in fees to the bank.

"At the very highest levels of JPMorgan, decisions were made to steer clients to JPMorgan products regardless of the damage which could result to beneficiaries such as Christ Church," the suit claims. "Most of the financial products found in the Christ Church Trusts' portfolio earned JPMorgan substantial revenues in disclosed and undisclosed fees."

A spokeswoman for JPMorgan said the bank does not comment on lawsuits.

At one point, the suit notes, as much as 85 percent of the church's portfolio was invested in "proprietary" JPMorgan investments including hedge funds and derivative investment products. In some cases, the church's money provided "seed" capital for new and unproven investment products.

When Eli Lilly Jr. died in 1977, he left 10 percent of his estate to the church, with management of three trusts divided among three local banks. None of the banks still exist; JPMorgan wound up managing two of the trusts after bank consolidation.

"At the time the will was written, banks were typically appointed as trustees to administer estates, collect and safeguard assets, and distribute testamentary bequests," the suit notes. "At the time, banks were prohibited from acting as broker-dealers and investment bankers, did not offer their own financial products other than conservative and transparent investments, and did not have a personal stake or interest in the specific investments."

All of the church's trusts are now managed by the Christ Church Cathedral Foundation, after JPMorgan resigned as trustee in December 2013. But the bank is still manager for some private-equity investments the bank won't be able to close out until 2023, said attorney Linda Pence, who's representing the church.

The church had a total endowment of $67.1 million as of December 2013.

The lawsuit recounts years of conflict between the church's investment committee and JPMorgan. For instance, in 2009, the investment committee asked the bank to reallocate funds into undervalued stocks, but the bank did the opposite, selling stocks to pile into bonds, the suit notes.

The bank also repeatedly pointed out it had full control over investments, as trustee, and refused to take any direction from the church's investment committee.

The lawsuit was filed in the U.S. District Court for the Southern District of Indiana in Indianapolis.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Today, I want to use this opportunity to tell everyone about Dr agbuza of agbuzaodera(at)gmail. com, on how he help me reunited with my husband after 2 months of divorce.My husband divorce me because he saw another woman in his office and he said to me that he is no longer in love with me anymore and decide to divorce me.I seek help from the Net and i saw good talk about Dr agbuza and i contact him and explain my problem to him and he cast a spell for me which i use to get my husband back within 2 days.am totally happy because there is no reparations and side-effect. If you need his help Email him at agbuzaodera(at)gmail. com

  2. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  3. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  4. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  5. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

ADVERTISEMENT