JP Morgan Ordered To Pay Frank Founder Javice's Lawyers While They Sue Her

By Jef Feeley

Delaware Chancery Court Judge Kathaleen St. J. McCormick concluded Monday JPMorgan was legally obligated to cover Javice’s legal bills, rejecting the bank’s argument that her alleged fraud fell outside the scope of the 2021 merger agreement. The ruling likely also covers Javice’s defense to criminal fraud charges brought by federal prosecutors over the disputed deal.

While the merger agreement contained language addressing fraud, the contract language doesn’t create a “carve out” to deny Javice and Amar advancement of legal fees, the judge concluded. 

“We continue to focus on the main issue of addressing our fraud claims against Ms. Javice and Mr. Amar through the legal process,” Pablo Rodriguez, a bank spokesman, said in an emailed statement.

Javice was charged with fraud by Manhattan federal prosecutors last month. She was also sued by the Securities and Exchange Commission. She has yet to enter a plea in the criminal case, and her lawyers and prosecutors last week asked for the case to be delayed for talks between the two sides. 

McCormick’s ruling likely comes as a relief to Javice, who has run into money problems as she deals with JPMorgan’s fraud allegations.

The entrepreneur moved millions of dollars out of JPMorgan after the bank fired her and accused her of fraud, but then wound up getting caught up in the collapse of Signature Bank. That institution was seized by state regulators in March after a run on the bank threatened its future. The Federal Deposit Insurance Corp. stepped in to insure Signature deposits.

Seized Accounts

Although she was able to move her money before regulators put Signature into receivership, her accounts later were seized by federal prosecutors who charged her with defrauding JPMorgan.

JPMorgan suggested in Delaware court filings in Javice was trying to hide assets in Nevada shell companies she set up. But she countered the government’s seizure of her funds vitiated any such concern.

If Javice is convicted of the fraud charges or she is found liable in JPMorgan’s lawsuit, the bank could seek to recoup any legal fees it advanced to her, said Larry Hamermesh, a retired University of Pennsylvania professor who taught about Delaware corporate law. Those outcomes could mean she no longer meant the standard to be indemnified by her former employer.

“She’ll have to fork over the fees” in that event, Hamermesh said, “if she has the money, that is.”

The case is Javice v. JPMorgan Chase Bank NA, 2022-1179, Delaware Chancery Court (Wilmington).