Morning Coffee: Sometimes Jamie Dimon is just too trusting. How to get a negative bonus in London this year

One of the golden rules of banking is that whenever you’re putting something in an email, chat message or any other permanent form, you should imagine what it might sound like read out in court.  For example, you might find it an amusing in-joke to write “there’s no need to do analysis at all” to the team working on a $175m acquisition, but when that acquisition turns into a fraud trial in which a key part of the defence involves questions about due diligence, it’s going to sound pretty bad.

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What makes it even more embarrassing is that this message, sent in 2021 by Leslie Wims Morris (at the time, Head of Corporate Development at JPMorgan), was actually a quotation from her chief executive.  Jamie Dimon wrote it in his letter to investors that year, and it seems to have been the prevailing spirit when JPM was acquiring a student loan fintech startup called “Frank”.

The fraud trial in question is that of Charlie Javice, the founder of Frank, who is alleged to have created a forged dataset of over four million customers, of which only 300,000 were actual people.  Her defence lawyers are trying to argue that JPM were aware of the true numbers all along and just have buyer’s remorse after the rules of the federal student loan programs changed to make the business unprofitable.

And whatever the eventual verdict, the story that has come out about due diligence will have a familiar ring to a lot of investment bankers – everyone seems to have assumed that everyone else was doing it.  In particular, the spreadsheet of customers seems to have been checked several time, but only to confirm that it did have four million records, not that any of them corresponded to actual people.

What’s most interesting, though, is that there don’t seem to have been any negative career consequences on the JPMorgan side.  Leslie Wims Morris has gone on to be the CEO of Chase Auto, and the two most senior JPM executives on the deal were Jenn Piepszak and Marianne Lake.  In fact, the only people involved who don’t work at JPMorgan any more were the two bankers who expressed scepticism about the deal, a corporate development VP called Sindhu Subramiam and Sarah Youngwood, the former CFO of Chase Bank. And both of them seem to have moved on to good jobs.

This might partly be because Jamie Dimon didn’t feel in a position to point the finger at anyone else for what he later described as “a huge mistake”.  The deal with Frank came about four weeks after Charlie Javice had a meeting with him, and it’s been suggested during the trial that he had personally championed the acquisition. 

Even the all-time greats of the industry mess up from time to time, and in a career as long as Jamie Dimon’s, there are bound to be a few turkeys.  In many ways, it says something quite good about JPMorgan’s management that there doesn’t appear to have been a scapegoating exercise, although nevertheless, it is presumably an experience nobody involved would care to repeat.

Elsewhere, there is nowhere in the world where the job of an investment banking Analyst is particularly compatible with having a normal family life.  However, for London bankers, there is a bizarre tax anomaly which means that it’s financially impossible too.

According to the most recent surveys, a third year analyst, for example, earns a basic salary of between £75k and £95k.  That means that, if they managed to beat the odds and start a family, a third-year analyst would be able to claim free childcare from a government program.

Or at least, they would until bonus time arrived.  The program is only available to families where neither parent earns more than £100k.  And the average third-year analyst bonus is around £40-60k.  That’s a sum of money which, once higher rate tax is paid, wouldn’t be enough to pay for the childcare at Central London rates.  In fact, it’s been calculated that once you go over the £100k threshold, you need to get paid £145k in order to regain the standard of living you had when your total comp was £99,999.  So if you see a British colleague more than normally distressed at having got a “meets expectations” award, this might be why.

Meanwhile …

A piece of pandemic nostalgia for KKR, which is being unfortunately reminded of the time that they bought a bicycle manufacturing firm at a time and price when it looked like people were going to be buying more bikes than they eventually did. The two partners responsible for the deal have left the firm, apparently for unrelated reasons. (FT)

Congratulations to CBE Capital and to Wegagen Capital Investment Bank, the first two investment banking licences to be granted in Ethiopia. (Bloomberg)

As a route into private equity, it’s probably less arduous than an investment banking analyst program – former Prime Minister David Cameron has started work at Finback Investment Partners, founded and chaired by Jeb Bush. (Financial News)

If you ever see a hedge fund called “Goose Bay Capital” start up, you’ll be able to guess that its founders met on one of the red-eye flights into Heathrow that had to make an unscheduled stop somewhere else because of the power cut. (Bloomberg)

JP Morgan has renamed its DEI program “Diversity, Opportunity and Inclusion” to make it sound less woke.  A good chance to call your friends there this morning and ask if they now work in “Opportunity Capital Markets” or “Opportunity Derivatives”. (FT)

Fine wine enthusiasts are bulk buying to try to beat the tariffs. (NY Post)

According to Stanley Capital Partners, co-founder Simon Cottle “is no longer with the business”.  According to Companies House, he ceased to be a “person with significant control” in December last year.  According to Simon Cottle, however, “it is legally not correct that I have left” the midmarket buyout house, and “as far as I know I’m not leaving”. (Financial News)

Why Robert won’t be in the next series of “Industry” (Slashfilm)

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