Christ Church Cathedral in Indianapolis has sued JP Morgan Chase & Co. in federal court in Indianapolis for fraud, self-dealing and mismanagement of trust accounts, Bloomberg reports.
Christ Church, an Episcopal church founded in 1837, was endowed by the descendants of drug company founder Eli Lilly. It claims that the bank selected unsuitable and poorly-performing investments for the church’s funds in order to further its own financial interests, in breach of state and federal securities laws. According to the church’s complaint, JP Morgan’s actions caused the church trusts to lose around $13 million in value, USA Today reports.
In the suit, the church says that JP Morgan decided “to purchase over 177 different investment products, mostly from itself, using church funds because they produced the highest revenues to JP Morgan, to the detriment of Christ Church,” USA Today says.
According to the complaint, the firm invested between 68 percent and 85 percent of the church trusts’ portfolio in products branded with JP Morgan’s name. The church claims that these investments, which included private equity and hedge funds, were “clearly unsuitable” for the church and performed poorly, Reuters reports.
The value of the trusts managed by JP Morgan fluctuated between $35.4 million and $39.2 million between 2004 and 2007, but by last December their value had dropped to $31.6 million. The bank resigned as the trusts’ trustee that month, according to The Associated Press.
In the meantime, JP Morgan’s annual fee increased from $35,000 to $177,800, according to Christ Church. In total the church has paid more than $1 million in fees to the bank, The Associated Press reports.
During this period, JP Morgan’s holdings increased by $1.4 trillion to $2.4 trillion, and its net revenues increased from $43 billion to $96.6 billion, Reuters reports.