Julien Grout, a former JPMorgan Chase & Co. trader charged with trying to hide the bank’s record trading loss last year, is arguing to prosecutors that he was following orders from his then-boss, Bruno Iksil, people with knowledge of the matter said.
Grout’s lawyers provided records including e-mails to U.S. prosecutors in Manhattan in the past two weeks in an effort to cast doubt on the government’s assertion that Iksil resisted pressure to inflate the value of the trades, said the people, who asked not to be named because the talks were private. While Grout and another supervisor, Javier Martin-Artajo, were charged with conspiracy and wire fraud, Iksil -- nicknamed the London Whale -- avoided prosecution after agreeing to cooperate with authorities.
The exchange shows that Grout, who is fighting accusations he improperly marked assets to hide losses, is trying to damage his former boss’s credibility. In announcing charges against Grout and Martin-Artajo last month, U.S. Attorney Preet Bharara in Manhattan said Iksil had sounded the alarm “more than once” to co-workers.
“It may be part of an attempt to tell the government that this case is weaker than you think, and you’ll be embarrassed,” John Coffee, a securities law professor at Columbia University Law School, said of Grout’s effort. E-mails are often a matter of debate, with defense attorneys trying “to tell the prosecution that they can’t go forward because their interpretation is wrong.”
JPMorgan, the biggest U.S. bank by assets, lost more than $6.2 billion last year on the derivatives bets made by its U.K. chief investment office, where the three men worked. Grout reported to Iksil, who reported to Martin-Artajo, the CIO’s head of credit trading. Iksil, nicknamed the whale because his trades were big enough to move markets, signed a non-prosecution agreement in June that requires him to “truthfully and completely disclose all information” while cooperating.
Iksil’s information “has been accurate and reliable, and corroborated by, among other things, documents, e-mails and recordings of telephone conversations,” Jonathan Polonitza, a special agent at the Federal Bureau of Investigation, wrote in a statement for the complaint against Grout. It referred to Iksil by the acronym “CW-1” for confidential witness.
It won’t be easy for Grout’s lawyers to change prosecutors’ view of the case, even if he hasn’t been indicted yet, Coffee said.
“Once you file a criminal complaint, while you’re not compelled to go forward with the indictment, you have crossed the Rubicon,” he said.