Tuesday Feb 28 2023
Oe would think a bank the size of J P Morgan would have a copetent due diligence team what with their involvement in captial markets. Apparently not. The seller of Frank says the buyer knew she only had 5,000 actual clients, those millions were just reading her website. Both parties are suing read the article.
frankly I have to wonder if J P Morgan is so big Jamie Dimon, who the press tells us is oh so smart, is unable to control it. Consider the $920 million fine it paid for spoofing trades.
_____________________
The woman who sold financial-aid startup Frank to JPMorgan Chase JPM 0.87%increase; green up pointing triangle
& Co. for $175 million said that the bank understood how big the company was before going through with the deal and that its fraud claims are unfounded.
Charlie Javice said the bank is trying to blame her for a failed strategy in a lawsuit it filed in federal court in December. In her reply to that suit Monday, Ms. Javice said JPMorgan’s claim that she invented 4 million customers out of whole cloth with a professor and some artificial intelligence is an effort to hide the reality that the biggest bank in the country just flopped on the transaction.
She said bank executives, including Chief Executive Jamie Dimon, had been eager to buy her company. In a meeting before the deal, Ms. Javice said, Mr. Dimon told her that he thought his team should “get the deal done.”
Ms. Javice is countersuing for damages and $27.9 million in compensation she says she is owed in the deal. The 30-year-old claims the bank has tarnished her reputation, likely for life.
JPMorgan acquired Frank, which helped customers apply for federal financial aid and provided information on college-funding options, as a way to tap into a vast market of college-age customers. Frank and Ms. Javice had a sizable media presence and attracted some big-name venture investors. Frank had said it had some 4.3 million users, and JPMorgan was eager to pitch them bank products.
The deal soured quickly. JPMorgan fired Ms. Javice last November and sued her in a U.S. District Court in Delaware the following month. The bank alleges she made a list of fake names to inflate Frank’s true size and trick the bank. In court filings, the bank showed emails and correspondence with a data-science professor who allegedly helped create the fake list of names.
Mr. Dimon has called the deal a “huge mistake.”
“We stand behind our allegations, and this dispute will be resolved through the legal process,” a bank spokesman said Monday.
In her first detailed defense, Ms. Javice didn’t dispute that fewer than 500,000 people had used the company to complete financial-aid forms. She said this question came up in meetings with JPMorgan executives ahead of the acquisition, and said she told the bank many of the nearly 4.3 million users were website users who read articles about financial aid or otherwise “trust Frank” to help understand the process of financing college.
Ms. Javice also denied she created a fake list of users to trick the bank. Instead, she said JPMorgan requested a “synthetic data” set of users to mirror Frank’s actual customers as a way to audit her users and avoid privacy concerns about sharing their real names. She said JPMorgan knew the information she was providing the user number was based on, but not actually reflecting, real user data.
Ms. Javice said the bank’s financial team would have known how many customers she had based on other metrics in her proposal, such as her total marketing costs. She told the bank she paid about $5 a customer in marketing costs, and had paid a total of $2.25 million in marketing.
Ms. Javice said JPMorgan’s claims were an attempt to cover up its own misconduct, including a plan to monetize information about past filers of the Free Application for Federal Student Aid, which would have run afoul of federal regulations. She said the bank was scrambling after it learned last summer of new restrictions on how Fafsa forms could be filed, changes that would have limited Frank’s ability to file applications on behalf of students.
