Opening of the Floodgates after Epstein Settlements for Wall Street
Credit: Stephanie Keith, Stringer, Getty Images
Initial Incident
After two large settlements were extracted from JP Morgan and Deutsche Bank over their relationships with Jeffery Epstein, lawyers put US banks and Wall Street ‘on notice’ of potential exposure to a client’s malfeasance.
‘Every financial institution right now should be very carefully reviewing their customer lists and looking at those who have any kind of criminal background and assessing that in a way that this has never been done before because they can now be held to account’ - Sigrid McCawley (lawyer for the class of Epstein victims who sued the banks)
This warning stated by McCawley, a partner at Boies Schiller Flexner, comes after the firm secured a total of $365 million in compensation for women who accused the banks of profiting from human trafficking by ignoring warnings about his crimes. In addition to this, tens of millions of dollars from Epstein’s estate have already been awarded to women who claimed abuse. However, these settlements have not drawn a line under the fallout over Epstein’s crimes, thus, Wall Street titans have been forced to cut ties with him and banks where he had accounts.
New Settlement
Hours before a $290 million settlement was reached with JPMorgan last week, Judge Jed Rakoff certified a class of dozens of women who seek to sue JPMorgan. This is the first time a class action was approved for sex trafficking victims under a US law known as the Trafficking Victims Protection Act. The law, first passed in 2000 was recently updated to allow victims to sue those who benefitted financially from ‘participation in a [human trafficking] venture’.
Under this law, plaintiffs are also able to circumnavigate the statute of limitations for negligence claims under a New York law that has temporarily allowed victims of sex crimes to revive time-barred claims. Thus, these Epstein cases have paved a new way under the law’ for survivors of sexual trauma to obtain compensation for what they endured. Similarly, hotel chains, transport companies, and even Meta have previously been faced with lawsuits over illegal trafficking.
One Wall Street lawyer questioned whether these cases would go on to set any substantive precedent. Two attorneys who appear regularly at the federal court in the Southern District of New York stated that the plaintiffs were lucky to have their case assigned to Rakoff who set in motion a speedy pre-trial process that put pressure on the banks to settle. Yet, deals have provided a boost to lawyers examining the disclosures prompted by the MeToo movement in recent years, many of whom stated this merely skimmed the surface of corporate exposure.
Significance
Banks that have done business with known criminals may now find themselves in jeopardy, even if they have complied with other legal obligations. For example, in JPMorgan’s case, the bank fulfilled some of its regulatory duties by filing ‘suspicious activity reports’ about Epstein as early as 2002. Deutsche Bank paid over $150 million to a New York regulator in 2020 over its handling of the Epstein relationship. However, neither of these moves was enough to preclude civil lawsuits from private plaintiffs.
JPMorgan, which did not admit any liability as part of its settlement, is not yet out of the woods. It still faces a claim by the US Virgin Islands, where Epstein had a home, over its decision to handle banking for the sex offender. It has since sued its former executive Jes Staley, alleging that he withheld information about Epstein when vouching for him to JPMorgan board members. The significance of the precedent may open the floodgates for more to come, leaving banks on high alert for any future correspondence.
By
Esther Zhang