The government imposes laws on how companies do business in order to protect the marketplace as well as consumers. When a company in Michigan or any other state fails to abide by these laws it could result in serious legal consequences, including lawsuits being filed against the company. Proper business planning to ensure compliance can help to avoid this type of situation. However, JP Morgan Chase ended up in this type of situation as a result of alleged wrongdoing during the recent subprime mortgage crisis.
The bank recently struck a reported deal with the U.S. Justice Department to end its civil case filed against the banking firm. Media reports have indicated that the bank will pay $13 billion to stop investigations by authorities into the bank's mortgage-backed securities which the bank sold before the mortgage crisis. This was the largest civil penalty to have ever been levied onto an American company and subsequently erased over half of the banking firm's profits from 2012.
The company decided to push for a settlement with the Justice Department after it was revealed to executives that the company had incurred almost $9.2 billion in litigation expenses. The settlement, along with ending the investigation into the banking firm's mortgage bonds, will also include settling litigation filed by the Federal Housing Authority, the National Credit Union Administration as well as several other lawsuits against the bank. However, the recent settlement only addresses the civil litigation case against the bank and still leaves the company vulnerable to criminal prosecution.
Although most companies in Michigan and other states will not find themselves in this big of trouble with the Justice Department, they may still face some legal problems without proper business planning that ensures compliance with the law. Knowledge of applicable rules and regulations will be essential in forming a compliance plan. Proper planning can save a business significant amounts of money by avoiding legal costs.
Source: Economy Watch, JPMorgan May Pay Record $13 Billion Fine For Role In Subprime Mortgage Crisis , Jorge Calvillo, Oct. 19, 2013