Sometimes the goal in negotiation is to improve your fortunes. But sometimes, the best you can hope for is to lessen the fallout from past mistakes.

Take the case of JPMorgan Chase, which in September was threatened with a lawsuit from the U.S. Department of Justice (DOJ) for its sales of troubled mortgage investments during the financial crisis. JPMorgan CEO Jamie Dimon’s hands-on negotiations to settle the potential charges and avoid a lawsuit, as recounted by Ben Protess and Jessica Silver-Greenberg in the New York Times, serve as a reminder of the burdens we must sometimes assume to head off a disaster.

In July 2013, Associate Attorney General Tony West met with JPMorgan executives at DOJ headquarters to outline an array of civil and criminal investigations of the bank. Along with its own behavior, the bank would be responsible for any charges stemming from improper sales of mortgage securities by two banks it had purchased during the financial crisis, Bear Stearns and Washington Mutual.

In the United States, companies commonly assume the legal liabilities of the firms they acquire unless they negotiate otherwise. JPMorgan apparently failed to negotiate more favorable terms in 2008.

During a meeting in August, JPMorgan asked the DOJ to persuade the U.S. attorney’s office in Sacramento to drop a criminal inquiry it had opened. The DOJ rejected JPMorgan’s $1 billion settlement offer.

Related Posts