Local officials had found a cash cow in Jeffrey Epstein and smoothed the way for him to operate with impunity in the U.S. Virgin Islands despite his sex offender status, JPMorgan Chase claims in its latest response to the V.I. government’s lawsuit alleging the bank violated the federal Trafficking Victims Protection Act.
JPMorgan filed an updated 30-page memorandum of law late Wednesday in opposition to the government’s motion to strike the bank’s affirmative defenses. Included were 68 previously sealed exhibits totaling nearly 400 pages, though many of them are still partially redacted, and much of the information is not new.
The exhibits, most of them emails between Epstein and his longtime office manager, former First Lady Cecile deJongh, illustrate how the wealthy financier used his money to foster connections with and influence the highest echelons of USVI society that, in turn, was only too happy to maintain a quid pro quo relationship, the bank alleges.
“But the far more lucrative return on Epstein’s investment came in the form of tax breaks given to his companies” by the V.I. Economic Development Authority through its Economic Development Commission tax incentive program, JPMorgan alleges. Epstein received these benefits starting in 1999 for his Financial Trust Company, which was later renamed Southern Trust Company and was at the center of the government’s lawsuit against his estate that was settled in November.
Epstein, 66 — a registered sex offender who pleaded guilty to procuring a minor for prostitution in Florida in 2008 — was found dead by apparent suicide in August 2019 while in detention in New York on federal human trafficking charges.
His primary residence was Little St. James, his private island off St. Thomas where for years he trafficked in girls and young women and ran a complex web of shell companies registered in the USVI that enabled his crimes, court documents have alleged.
The wealthy financier, who held some 50 JPMorgan accounts, received lucrative tax benefits for his businesses through the territory’s Economic Development Commission, which at the time was chaired by now Gov. Albert Bryan Jr. At the time of his death his estate was valued at more than $577 million, according to court documents.
The V.I. Attorney General’s Office filed suit against JPMorgan in December in federal court in Manhattan, alleging it aided Epstein’s sex-trafficking scheme in violation of the federal Trafficking Victims Protection Act. The bank has denied wrongdoing and has called the suit a “masterclass in deflection.”
Currently at issue is JPMorgan’s argument that it should be allowed to use affirmative defenses — essentially that the USVI was equally complicit in fostering a climate in which Epstein could commit his alleged crimes — and treat the government as it would a private civil litigant.
The USVI claims that is nonsense, and on Monday filed an updated memorandum of law in opposition to JPMorgan’s affirmative defenses, including exhibits of internal JPMorgan communications in which bank officials voiced concerns about keeping Epstein as a client as early as 2007 as information about his Florida arrest and subsequent federal investigations into his alleged sex trafficking came to light.
In its updated memorandum Wednesday, JPMorgan alleges that for two decades, and for long after it exited Epstein as a client, “the entity that most directly failed to protect public safety and most actively facilitated and benefited from Epstein’s continued criminal activity was the plaintiff in this case — the USVI government itself.”
A Well-Connected Office Manager
“Epstein’s primary conduit for spreading money and influence throughout the USVI government was First Lady de Jongh,” JPMorgan alleges.
De Jongh, who worked for Epstein the entire time her husband was governor from 2007 to 2015, routinely interacted with the EDA on behalf of Epstein’s Financial Trust Company regarding the company’s benefits under the EDC program, the bank alleges.
“Indeed, Sandra Bess, the EDC Program Compliance Officer tasked with ensuring FTC’s (and, later, STC’s) compliance with the terms of the EDC Program’s tax benefit grants, identified Ms. de Jongh as the FTC and STC ‘compliance person’ and ‘office manager,’” the bank alleges.
“Yet, when Governor de Jongh was contacted by a reporter regarding the potential conflict of interest inherent in the USVI government granting millions in tax incentives to his wife’s employer, the First Lady suggested to Epstein that they respond with the following statement: ‘Cecile de Jongh currently works for Financial Trust Company in the capacity of office manager. She had nothing to do with Financial Trust Company receiving EDC tax benefits.’”
The EDA was well aware of Epstein’s past, even requesting an assessment of the potential impact on STC’s business in light of “current media discussions surrounding a principal of Southern Trust Company,” according to one exhibit, a letter from the authority’s director of compliance in January 2015. “Yet, despite the numerous red flags, STC continued to enjoy EDA benefits for five more years,” the bank says.
By 2019, after months of public scrutiny, EDA employees began to acknowledge their role in enabling Epstein, according to the memorandum.
In October that year, a New York Times reporter contacted the EDA concerning oversight of Epstein’s business, noting, “The piece will raise the point that the USVI has been criticized for not closely overseeing beneficiaries of the tax incentive programs,” according to one of the exhibits.
Margarita Benjamin, the managing director of the EDA, forwarded the email to two colleagues, writing, “Good Day Ladies, Please see the recent request from the NY Times. Your feedback on the response is appreciated. I personally think the questions are opening us up to public scrutiny.”
One of those colleagues was Bess, who was deposed in the case in May. The EDA did not audit FTC until 2008, nearly 10 years after granting FTC’s original application, according to her testimony.
“Would it be unusual for a company to not get a compliance report until nine years after they started as a certificate holder? Would that be unusual?” Bess was asked.
“It is — should not be unusual but it maybe has happened in one or two cases,” she replied.
According to the deposition, the compliance review process of annual reports filed by beneficiaries of the EDC program typically only involved ensuring that the figures contained in the summary page of a company’s annual report matched the back-up evidence pages included in the same report, many of which were authored by the company itself.
“I would look at the presentation and what was presented at the back and ensure that the numbers total, and then that’s the information I would use,” Bess testified.
“And would you look at any third-party sources or just the information the company provided in terms of verifying their income and the tax benefit?” she was asked.
“Only if it’s unclear, and I would need to veri — go a little further to clarify the information provided,” Bess replied.
“But as long as what was provided appear to support the numbers on the cover sheet, that will be the end of your analysis?” she was asked.
“Typically, it would be,” Bess replied.
“Now, is any part of your job as a compliance officer reviewing the character of the people who are the owners of the companies receiving tax benefits?” she was asked.
“No, sir,” Bess replied.
“Is there anybody at the Economic Development Authority who has that responsibility?” she was asked.
“To the best of my knowledge, that would come prior to — I — to me receiving the certificate as a compliance officer, it would usually come from the application side — application division,” Bess replied.
However, according to the transcript of Epstein’s presentation to the EDC in 2012, when he sought benefits for STC, no one asked questions about his criminal conviction or sex offender status.
Epstein was awarded those benefits on Jan. 24, 2014, according to a certificate signed by Bryan as chairman of EDC and by Epstein, who was president of STC.
That same day, de Jongh emailed Epstein, “I have been fundraising for John’s final State of the Territory reception on Monday night. I have raised $15K of the total $35K budget. Would you be willing to match that? John and I will cover the balance.” An hour later she emailed Epstein’s accountant, Richard Kahn, saying, “Hi Rich, Can you please prepare a check for $15,000 made payable to Governor’s Special Events Fund. Thanks.”
On Wednesday, JPMorgan filed a second letter asking the court to intervene over the USVI’s refusal to lift “confidentiality designations” on documents the bank seeks to make public in its defense, including Epstein’s EDC records.
While the documents contain embarrassing communications, avoiding embarrassment is not a basis to keep court filings sealed, according to the letter signed by Felicia H. Ellsworth of WilmerHale, the law firm representing JPMorgan.
“USVI has not identified any basis to designate these materials confidential under the Protective Order. They do not contain confidential financial information, information reported to law enforcement, materials related to ownership of a non-public company, trade secrets, information of an intimate nature, Bank Secrecy Act materials, or information designated Confidential Supervisory Information by a financial regulator,” the letter states.
“Instead, USVI asserts that exhibits must be kept confidential under an inapplicable federal statute, 26 U.S.C. § 6103, that governs the confidentiality of federal tax returns and the information therein. As an initial matter, this statute does not apply to the documents USVI seeks to withhold, which were [redacted],” it says.
Judge Jed Rakoff of Manhattan federal court had not ruled on the matter as of Thursday.
JPMorgan Attempting to ‘Shift Blame’
On Thursday, the V.I. Attorney General’s Office said JPMorgan’s latest filing is nothing more than an attempt to shift blame and distract from the bank’s role in Epstein’s crimes.
“JPMorgan Chase has cherry-picked and mischaracterized Epstein’s interactions with U.S. Virgin Islands officials and residents in an attempt to distract and shift blame away from its role in facilitating Jeffrey Epstein’s heinous crimes. JPMorgan Chase seeks to attack the people of the Virgin Islands for not discovering the very information that bank executives refused to share. JPMorgan Chase had a legal responsibility to report the evidence in its possession of Epstein’s human trafficking, it failed to do so, and it should be held accountable for violating the law,” said Venetia Velazquez, a spokesperson for the V.I. Attorney General’s Office.
“The documents disclosed in the litigation reveal the USVI identified and addressed deficiencies in Southern Trust’s and Financial Trust’s compliance with the federal tax incentive program,” said Velazquez. “In contrast, documents made available through the USVI’s litigation confirm that JPMorgan Chase failed to adequately address the financial red flags of Epstein’s ongoing human trafficking, and failed to comply with a federal law that was put in place to do just that.”
