J.P. Morgan Chase was ordered by arbitrators to pay $373 million to American Century Investments over claims that executives led by Jes Staley enriched the bank at the expense of the money management firm.
The award, issued privately in August, focused on J.P. Morgan’s promise to promote American Century products when the bank acquired the firm’s retirement plan services unit, or RPS, in 2003.
Because Mr. Staley, then J.P. Morgan’s asset management chief, mistakenly thought there was a limit on the bank’s liability if it didn’t meet obligations, executives failed to make good on the deal, arbitrators found. Employees were instead rewarded for pushing J.P. Morgan’s own products, according to the ruling.
The arbitrators awarded American Century $373 million plus 9% annual interest until paid in full.
J.P. Morgan set aside funds to cover the award during last year’s third quarter. Parties in the case had agreed to resolve it privately through arbitration and the ruling had been sealed.
Mr. Staley was promoted to lead J.P. Morgan’s investment bank in 2009.
The case was brought to the American Arbitration Association in 2009 and tried before a two-person panel in February and March 2011. In their ruling, the panelists said they reviewed about 600 exhibits and heard testimony from almost 50 witnesses, including Mr. Staley.
“We disagree strongly with the arbitrator’s decision and award,” Kristen Chambers, a spokeswoman for J.P. Morgan, said Thursday. “Among other things, it misinterprets the contract, ignores facts favorable to us such as the performance of certain American Century funds during the period in dispute, and ignores expert opinions that were favorable to us.”
Chris Doyle, a spokesman for American Century, said the firm is “very pleased” with the decision.