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

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Someone off their meds? C'mon John, it is called the politics of Empire. Get with the program, will ya? How can we build one world under secularist ideals without breaking a few eggs? Of course, once it is fully built, is the American public who will feel the deadly grip of the velvet glove. One cannot lay down with dogs without getting fleas. The cup of wrath is nearly full, John Smith, nearly full. Oops, there I go, almost sounding as alarmist as Smith. Guess he and I both need to listen to this again: https://www.youtube.com/watch?v=CRnQ65J02XA

  2. Charles Rice was one of the greatest of the so-called great generation in America. I was privileged to count him among my mentors. He stood firm for Christ and Christ's Church in the Spirit of Thomas More, always quick to be a good servant of the King, but always God's first. I had Rice come speak to 700 in Fort Wayne as Obama took office. Rice was concerned that this rise of aggressive secularism and militant Islam were dual threats to Christendom,er, please forgive, I meant to say "Western Civilization". RIP Charlie. You are safe at home.

  3. It's a big fat black mark against the US that they radicalized a lot of these Afghan jihadis in the 80s to fight the soviets and then when they predictably got around to biting the hand that fed them, the US had to invade their homelands, install a bunch of corrupt drug kingpins and kleptocrats, take these guys and torture the hell out of them. Why for example did the US have to sodomize them? Dubya said "they hate us for our freedoms!" Here, try some of that freedom whether you like it or not!!! Now they got even more reasons to hate us-- lets just keep bombing the crap out of their populations, installing more puppet regimes, arming one faction against another, etc etc etc.... the US is becoming a monster. No wonder they hate us. Here's my modest recommendation. How about we follow "Just War" theory in the future. St Augustine had it right. How about we treat these obvious prisoners of war according to the Geneva convention instead of torturing them in sadistic and perverted ways.

  4. As usual, John is "spot-on." The subtle but poignant points he makes are numerous and warrant reflection by mediators and users. Oh but were it so simple.

  5. ACLU. Way to step up against the police state. I see a lot of things from the ACLU I don't like but this one is a gold star in its column.... instead of fighting it the authorities should apologize and back off.

ADVERTISEMENT