Ina Drew, then head of JPMorgan’s chief investment office, reenlisted Goldman to help with strategy at her unit after Cantor settled the NYSE’s inquiry in 2010, according to two people. He was head of risk strategy before his appointment in February, when the company’s main risk officer, John Hogan, named Goldman the unit’s head of risk, one of the people said. While others at the bank knew about Goldman’s firing from Cantor, Hogan wasn’t aware when he appointed him to the job, the person said.
Drew retired four days after Dimon announced the CIO loss on May 10. For years, Dimon had sought to transform the unit and increase the size of its speculative bets, former employees have said. The firm hired Achilles Macris, 50, in 2006 to oversee trading in London and lead an expansion into corporate and mortgage-debt investments with a mandate to generate profits, three former employees have said. One London trader, Bruno Iksil, amassed positions so big he began driving price moves in the $10 trillion market for derivatives linked to the financial health of corporations, Bloomberg News reported on April 5.
On April 13, Dimon called news about the London trades a “complete tempest in a teapot.” As the positions fueled losses in the following days, Hogan removed Goldman from much of his duties, one of the people said.
The Justice Department and the Federal Bureau of Investigation in New York have begun a criminal probe of the trading loss, a person familiar with the matter has said. The Securities and Exchange Commission is reviewing the transactions and the Commodity Futures Trading Commission voted May 18 to open an investigation, according to two people briefed on the matter. The U.K. Financial Services Authority, which regulates banks, is examining the role played by employees in London, where the trading occurred, people familiar with the talks have said.
NYSE investigators focused on Goldman’s trading in shares of Forbes Medi-Tech Inc. and Immunicon Corp. In October 2005, he bought Forbes Medi-Tech, a Vancouver-based biotech firm, for his retirement account, a joint account with his wife and trust accounts for his two children, according to Cantor’s settlement. Goldman also started buying the shares for a Cantor proprietary account in January 2006, accumulating more than 3.4 million by March 2 of that year, the document shows.
‘Dozens’ of Orders
In December 2006 the biotech company announced disappointing results for a clinical trial of its cholesterol- reducing drug, prompting the shares to drop. Goldman sold the stake in the proprietary account over the next several days, continuing to trade in personal accounts for another nine months.
He accumulated more than 2 million shares of Immunicon, a Huntingdon Valley, Pennsylvania-based maker of cancer diagnostic tests, for Cantor in 2006, while buying as many as 367,000 shares for his personal account, according to the NYSE. On some days, Goldman placed “dozens of buy and sell orders,” often “within minutes of each other,” according to the settlement document. Immunicon filed for bankruptcy protection in June 2008, agreeing to sell most of its assets to a unit of Johnson & Johnson, the New Brunswick, New Jersey-based maker of health- care products.
The NYSE found that Cantor failed to monitor Goldman’s personal bets. The firm’s own policies also barred traders from making personal wagers on the same stocks they bought for proprietary accounts, and it required them to hold their personal investments for at least 10 days, the settlement shows.