A federal class action lawsuit alleging massive and systemic fraud on the part of JPMorgan Chase has the potential to send the entire nation’s bankruptcy system into a tailspin, according to legal experts. The lawsuit, filed in January, claims that the banking giant knowingly produced falsified documents during consumer bankruptcy proceedings to collect on debts that it otherwise should not have been able to collect. According to the complaint, the documents often represent that JPMorgan Chase is the rightful lender, even when the actual lender is unknown.
“I can’t say who is manufacturing the documents, but the issue is it starts with the principal, which in this case is JPMorgan Chase,” says J. Arthur Roberts, the attorney who is representing the class of California debtors. “We’re planning on filing similar suits against other lenders.”
The case comes at a time when the financial industry is under exceptional scrutiny for a series of questionable and downright illegal practices. For instance, some of the country’s largest banks are working with a number of states’ attorneys general to come to a settlement over robo-signing foreclosure documents. Robo-signing occurs when the bank signs off on foreclosure documents without thoroughly reviewing the content for accuracy. There have also been recent allegations that errors in JPMorgan Chase’s computer system have resulted in wrongful foreclosures.
The allegations in the California class action are some of the most serious yet. The plaintiffs are accusing the bank of deceiving tens of thousands of consumers as well as bankruptcy judges, Chapter 7 trustees, Chapter 11 trustees, Chapter 13 trustees, the Office of the United States Trustee, creditors, creditor attorneys and debtors attorneys.
“If JPMorgan is wrongfully filing proof of claims in these bankruptcies and is receiving payments from the bankruptcy court, I don’t even know what that does to the system,” says Scott Dillon, a lawyer at Tully & Rinckey. “It is a total circumvention of the whole intent of bankruptcy. It is craziness to me.”
Please see full article below for more information.