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. Two cops shot execution style in NYC. Was it first amendment protest, or was it incitement to lawlessness? Some are keeping track of the body bags: http://www.breitbart.com/big-government/2014/12/13/al-sharpton-leads-thousands-in-saturday-march-on-washington-dc/

  2. From the MCBA: “This situation is not just about the death of Michael Brown, but the thousands of other African-Americans who are disproportionately targeted and killed by police officers.” The association said it was “saddened and disappointed” by the decision not to indict Ferguson police officer. HOPING that the MCBA will denouce the execution style killig of two NYC police officers this day, seemingly the act of one who likewise believes that the police are targeting blacks for murder and getting away with it. http://www.mediaite.com/online/two-nypd-cops-fatally-shot-in-ambush-in-brooklyn/ Pray this violence soon ends, and pray it stays far away from Indiana.

  3. "Am I bugging you? I don't mean to bug ya." If what I wrote below is too much social philosophy for Indiana attorneys, just take ten this vacay to watch The Lego Movie with kiddies and sing along where appropriate: https://www.youtube.com/watch?v=etzMjoH0rJw

  4. I've got some free speech to share here about who is at work via the cat's paw of the ACLU stamping out Christian observances.... 2 Thessalonians chap 2: "And we also thank God continually because, when you received the word of God, which you heard from us, you accepted it not as a human word, but as it actually is, the word of God, which is indeed at work in you who believe. For you, brothers and sisters, became imitators of God’s churches in Judea, which are in Christ Jesus: You suffered from your own people the same things those churches suffered from the Jews who killed the Lord Jesus and the prophets and also drove us out. They displease God and are hostile to everyone in their effort to keep us from speaking to the Gentiles so that they may be saved. In this way they always heap up their sins to the limit. The wrath of God has come upon them at last."

  5. Did someone not tell people who have access to the Chevy Volts that it has a gas engine and will run just like a normal car? The batteries give the Volt approximately a 40 mile range, but after that the gas engine will propel the vehicle either directly through the transmission like any other car, or gas engine recharges the batteries depending on the conditions.

ADVERTISEMENT