Is JPMorgan Immune from Investigation into Spring-Loading of Options Grants?

As readers will recall, JP Morgan (JPM)
received the first large bailout from the New York Fed of $55 billion,
guaranteed by Bear Stearns' worthless assets, to prop up its own
liquidity position and buy Bear Stearns stock.

JP Morgan also recently received another $25 Billion in TARP payments from the Treasury.

This
article is about how JP Morgan's executives, instead of receiving
easy-to-detect cash bonuses, received very large bonuses in the form of
Stock Appreciation Rights (SARs) and Restricted Stock Units. These
equity compensation securities are not easy to understand or value by
other than experts in the field.

SARs are very similar to employee stock options and Restricted Stock Units are very similar to Restricted Stock.


These SARs were granted on January 20, 2009, the day that JP Morgan
stock reached its lowest in five years. The stock quickly rebounded as
illustrated in the graph below. The arrow indicates the day and the
price of the stock when the grant was made.

On January 22,
2008, we see a repetition of the grants of SARs with the stock hitting
a low point followed by a substantial rebound in the next days.

Let's examine the size of the bonuses of the top 15 executives at JP
Morgan, that were granted on January, 20, 2009 and reported two days
later. See here.

Stock Appreciation Rights Granted

SARs Amounts Name of Exercise Value 2/4/09
Granted Grantee Price

700,000 Winters 19.49 $11,300,000
700,000 Black 19.49 $11,300,000
500,000 Staley 19.49 $8,100,000
300,000 Scharf 19.49 $4,890,000
250,000 Drew 19.49 $4,075,000
200,000 Miller 19.49 $3,260,000
200,000 Rauchenberger 19.49 $3,260,000
200,000 Smith 19.49 $3,260,000
200,000 Zubrow 19.49 $3,260,000
200,000 Bisignano 19.49 $3,260,000
200,000 Mandelbaum 19.49 $3,260,000
200,000 Cavanaugh 19.49 $3,260,000
200,000 Cutler 19.49 $3,260,000
200,000 Maclin 19.49 $3,260,000
100,000 Daley 19.49 $1,630,000
----------------------------------------------------------------------------------------
Total value (2/6/09) of SARs Granted = $81,405,000

Restricted Stock Units Granted

RSUs Amounts Name of Market Value RSUs Value
Granted Grantee of stock 2/4/09 2/4/09

115,474 Staley 24.10 $2,782,923
102,644 Miller 24.10 $2,473,720
102,644 Scharf 24.10 $2,473,720
102,644 Smith 24.10 $2,473,720
102,644 Bisignano 24.10 $2,473,720
102,644 Cavanaugh 24.10 $2,473,720
102,644 Drew 24.10 $2,473,720
102,644 Maclin 24.10 $2,473,720
89,813 Zubrow 24.10 $2,164,493
89,813 Cutler 24.10 $2,164,493
59,662 Daley 24.10 $1,364,542
35,926 Rauchenberger 24.10 $865,816
--------------------------------------------------------------------------------------------------
Total value (2/6/09) of RSUs Granted = $30,500,000

Total value (2/6/09) of Grants to top 15 executives = $111,905,000

These
totals are far more than the top executives of Merrill Lynch were to
receive as their year end bonuses in cash and equity. The New York
Attorney General is supposedly investigating Merrill's executives for
criminal wrong doing.

Merrill CEO Thain was
granting himself just $10 million whereas at least three Morgan
executives exceeded that in equity compensation alone.

An
interesting question arises from an examination of the fact that for
the past two years grants were made on or around January 20. It just
happened that the stock dropped prior to the grant and moved upward
immediately after the grants. It's hard to accept the idea
that those executives just got very lucky for two years in a row. Yes,
I am suggesting collusion in the manipulation of the stock to
accommodate the grants of options, etc.

Some refer to this as spring-loading the options grants.

Is JP Morgan immune from investigation?

Now what we find is that bankers' errand boy extraordinaire CEO James Dimon is

more...http://seekingalpha.com/article/119304-is-jpmorgan-immune-from-investigation-into-spring-loading-of-options-grants