JP Morgan faces FBI investigation over losses

The FBI and the US Department of Justice are examining whether there was any criminal wrongdoing in losses that have damaged the reputation that JP Morgan and Mr Dimon have built for risk management.

America's largest bank by assets has been battling to contain the fallout from the losses, which Mr Dimon described as "self-inflicted".

Yesterday, at the bank's annual shareholder meeting in Tampa, Florida, the banker admitted: "It should never have happened. I can't justify it."

The 56 year-old, one of the most powerful bankers on Wall Street, said he would consider clawing back the bonuses of any executives found to be responsible.

The losses have already cost Ina Drew, the head of the bank's chief investment office, her job and more are expected to leave the bank.

Mr Dimon yesterday refused to say how long its own internal investigation will take, but said the bank would "do the right thing".

In a further blow to Mr Dimon, whom President Barack Obama once described as his "favourite banker", 40pc of JP Morgan's shareholders voted to split his dual role as chairman and chief executive.

The crisis is the biggest that Mr Dimon has faced since shepherding JP Morgan through the financial crisis. Just a month ago, he dismissed reports about large trades the bank was making in an obscure corner of the derivatives market as nothing more than a "tempest in a teapot". Yesterday, he promised shareholders that "we will do the right thing" in investigating the losses.

But there was little sign of the controversy abating yesterday. John Liu, who runs New York City's pension fund, yesterday joined the call for bonuses of those executives responsible for the losses to be taken back.

The disclosure of the losses in the credit derivatives market has reignited the debate in the US over whether more regulation is needed to ensure the safety and soundness of the financial system.

Mr Dimon has been one of the most outspoken critics of the wave of regulation since the financial crisis, but insisted to shareholders that he was in favour of "sound and strong" regulation.

JP Morgan, which employs thousands of people in the City of London, has warned that the $2bn losses could deepen over the course of the year.

While some shareholders at the Florida AGM offered support to Mr Dimon, others were alarmed and baffled at the scale of the losses that the bank said it ran up in six weeks. "I'd like to have a clearer sense of the risk that I'm taking when I invest in JP Morgan," said Eric Vlahov, a shareholder. "Right now you don't."

Although the proposal to appoint an independent chairman failed to win the support of the majority of shareholders, the size of the vote in favour may have surprised the bank's board.

Most votes are likely to have been submitted before the trading losses were disclosed last Thursday. However, 91.5pc of shareholders backed the pay of Mr Dimon, which totalled $23m last year.

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UK police arrest 3 in police bribery investigation

LONDON (AP) -- A journalist from Rupert Murdoch's Sun tabloid and two other suspects were arrested Thursday as part of an investigation into corrupt links between the British police and the press, officials said.

The bribery investigation is running alongside two other probes into phone and computer hacking sparked by revelations that reporters at Murdoch's now-shuttered News of the World tabloid routinely intercepted communications of those in the public eye.

Police said the arrests early Thursday were the result of information passed on from Murdoch's News Corp., which has vowed to get to the bottom of criminality at his British newspaper subsidiary, News International.

The company's management and standards committee is carrying out its own internal investigations into the U.K. newspapers still in Murdoch's stable — The Sun, The Times and the Sunday Times — and has been cooperating with the police investigations.

News International confirmed that one suspect arrested in the dawn raids Thursday worked at The Sun newspaper but would not name the journalist. He was identified as Duncan Larcombe, The Sun's 36-year-old royal editor, by other British media including the Press Association and Sky News.

Police did not name the suspects but said a 36-year-old man was arrested at his home in Kent on suspicion of conspiracy to corrupt and cause misconduct in a public office. He was being questioned at a Kent police station.

Larcombe has testified that he had never paid a police officer for a story or hacked computers, telling a U.K. judge-led inquiry into press wrongdoing that he always acted ethically while at the Sun.

In a witness statement to the inquiry, Larcombe acknowledged that his paper sometimes paid members of the public for stories. He said all such payments had to be authorized by the news desk.

Police said two other people — a 42-year-old man and a 38-year-old woman — are being questioned at a Lancashire police station after being arrested at their home early Thursday. The man, a former member of the armed forces, was arrested on suspicion of misconduct in a public office and the woman was arrested on suspicion of aiding and abetting that misconduct, police said.

Officers searched the homes of those under arrest, Scotland Yard added.

In all, 43 people have been arrested in three parallel investigations into alleged bribery of public officials, phone voice mail hacking and computer hacking — including at least 25 past and present employees of News International. Some have been arrested more than once on suspicion of different offenses.

Britain's chief prosecutor said Wednesday that criminal charges are being considered against 11 people in four cases related to hacking investigations.

Four journalists, one police officer and six other people are involved in those cases, the first to be referred to prosecutors since the probes were launched amid public outrage that journalists at Murdoch's News of the World had routinely intercepted voice mails of celebrities and crime victims.

Murdoch closed the 168-year-old tabloid in July, while British Prime Minister David Cameron ordered a sweeping, judge-led inquiry into British media ethics to determine why an initial 2006 police investigation into phone hacking failed to uncover the scope of the problem.

That inquiry, headed by Lord Justice Brian Leveson, has heard extensive sworn testimony about gross criminal acts committed by tabloid reporters, including descriptions of how reporters hacked into the phone of a missing girl later found murdered.

Celebrities have described extreme media harassment and said they felt stalked and trapped by overzealous, unscrupulous reporters.

The Leveson Inquiry, expected to eventually propose reforms to the press system, resumes on Monday.

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Cassandra Vinograd can be reached at http://twitter.com/CassVinograd

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