An Oklahoma judge has recently held that J.P. Morgan & Chase Co.’s administration of the Carolyn S. Burford trust was “grossly negligent and reckless.” As a result, the court ordered J.P. Morgan to pay the trust $18.1 million, as well as punitive damages and legal fees.
According to a recent article in the New York Times, the order for monetary damages came after the Tulsa County Judge found that J.P. Morgan breached its fiduciary duties in handling the trust account. In 2000, J.P. Morgan sold variable prepaid forward contracts to the trust. The court determined that this sale was a breach of fiduciary duty. Not only did the bank fail to ensure that the client understood what the product was, but it also failed to disclose the fact that the transaction was beneficial to the bank. The court further found that the bank was “double dipping” when it used the proceeds from the contracts to further invest in it’s own investment products.
Current law requires that brokers handling trust accounts act in the best interest of the client. According to J.P. Morgan spokesperson Douglas Morris, “We disagree with the court’s decision and will take all appropriate measures to respond, including appealing the decision.”
