Churches Accuse JP Morgan Of Mishandling Funds Worth Millions

Two churches and a public library have accused America's biggest bank, JPMorgan, of mismanaging their funds, leading to lawsuits that can cost the bank millions of dollars.

The Christ Church Cathedral of Indianapolis has sued the bank for intentionally mismanaging its funds, allegedly causing $13 million in losses, even as the bank's fees soared, CNN reported.

The church's large trust fund from Eli Lilly, Jr. of pharmaceutical fim Eli Lilly, was handled by the Indiana National Bank, American Fletcher National Bank and Trust and Merchants National Bank & Trust Company of Indianapolis as trustees. In 2004, JPMorgan bought two of the three banks.

The church's portfolio of stock and bond funds was replaced by the bank's own funds, and in 2007, it was placed in complex investments such as structured notes, derivatives and hedge funds, which resulted in higher fees.

Christ Church paid, among others, a basic management fee of $177,800 by 2013 from $35,000 a year in 2004. JPMorgan never fully revealed information about the other fees, according to the church's lawsuit. By 2009, 75 percent of the 52 investment funds where the church's money was placed became the bank's own proprietary products.

The trust fund's value dropped to $31.6 million by December 2013 from $34.6 million in 2004, when the bank took over the money.

Because of this, the church had to scale back its charity work. The Christ Church supports a food bank, a homeless shelter, and a center for abused women. It also handed aid to Haiti.

"We've had to cut staff and cut back on the amount of money we give away to the community," Rev. Stephen Carlsen, dean of the Christ Church Cathedral, said. "The cutbacks have been real."

"The losses cited in this complaint have prevented Christ Church from achieving the growth needed to fund its ministries and are the inevitable consequence of an obvious conflict of interest," said Linda Pence, attorney for Christ Church, in a statement by the church in August after filing charges against the bank.

The bank, on the other hand, claimed the church is "cherry picking" the details.

"Even though the Trust distributed more than $13 million to the church between 2006 and 2013, the Trust still gained well over $10 million during that period," JPMorgan spokeswoman Kristen Chambers said in an email, as quoted by CNN.

The Sandscrest Foundation, which benefits the Episcopal Diocese of West Virginia, has filed a similar lawsuit against JPMorgan in March, Bloomberg reported.

Like in the case of the Indiana church, the foundation believes JPMorgan mismanaged its charitable trust.

An Illinois library has also alleged that the bank has put its own financial interests first in handling its $24-million trust.

About $750,000 of the said money, which benefits the Parlin-Ingersoll Public Library in Canton, Illinois, was placed in a commodities fund, which at that time had no performance history and had the lowest rating from fund tracker Morningstar Inc. in Chicago.

JPMorgan appeared to have sold the stake in 2013, Bloomberg wrote, at a $254,000-loss.

The library's director, Kimberly Brunner, said the bank has put $7 million in total or 30 percent of the trust into its own funds, in a letter sent to the bank in October 2013.