Recently, Charlie Javice was arrested in New York and charged with fraud. She is the founder and former CEO of fintech Frank, which JP Morgan bought for $175 million. She allegedly misled JP Morgan about the true state of the company. In 2018, ING acquired Payvision, founded by Rudolf Booker, at a valuation of €360 million. ING expected Payvision to be a different company. The fintech made most of its revenue from merchants in the porn and gambling sectors – and with scammers.
Failed Attempts
JP Morgan and ING wanted to add essential building blocks on the way to the digital age with the acquisitions of the fintechs Frank and Payvision, respectively In both cases, the acquisitions turned out to be a disaster. In both cases, one wonders how the acquisitions survived due diligence. Apparently, it failed for JP Morgan and ING.
The Handling
While the CEO of JP Morgan, Jamie Dimon, officially admitted the mistake and called the acquisition a big mistake. He did so within a few months after the takeover. Consequently, the bank filed a lawsuit against Frank founder Charlie Javice, ING did nothing against Rudolf Booker and his colleagues on the board. They pocketed several hundred million. The then ING CEO Ralph Hamers and his successor Steven van Rijswijk were allegedly involved in the Payvision takeover. Payvision has since been closed, and €500 million have been sunk!
The Directors Obligations
JP Morgan and ING boards must represent their shareholders’ interests and justify why hundreds of millions were sunk on bad acquisitions. In this respect, it is in the interest of the JP Morgan and ING shareholders that the banks get back the money that was spent senselessly. Otherwise, the shareholders will foot the bill for the misconduct of the board members. Jamie Dimon understood this fundamental concept well. The ING board apparently did not.
Other Enforcement Actions
While JP Morgan brought the lawsuit against Charlie Javice, the U.S. Securities and Exchange Commission (SEC) also brought a fraud suit against them. Finally, the U.S. DOJ filed an indictment, and Javice was arrested in early April 2023.
In the Netherlands, the financial markets authority filed a complaint with law enforcement following an audit of Payvision, which was found to have engaged in numerous systematic acts of misconduct. The criminal investigation against Payvision and its management is ongoing.
Preliminary conclusion
First, it must be noted that the U.S. legal system is different from European ones. There is no question about that. The U.S. tradition of cracking down on financial, tax, and economic crimes with often drastic penalties has no equivalent in Europe.
However, even in Europe, the board members of a bank are responsible to the shareholders and may be personally liable for serious offenses. Former ING board member Ralph Hamers knows this only too well. The authorities are investigating him in a money laundering case for which ING has already paid the fine. However, ING shareholders want Hamers, as acting CEO at the time, to be held accountable.
Why Dutch authorities, unlike their U.S. counterparts, take years to complete investigations and file charges remains a mystery.
