March 16, 2008
Chairman and Chief Executive Officer
JPMorgan Chase & Co.
270 Park Avenue
New York, New York 10017
Re: The Bear Stearns Companies Inc.
Dear Mr. Dimon,
We have been advised by officials of the Board of Governors of the Federal Reserve System and the U.S. Department of the Treasury that JPMorgan Chase & Co. (“JPM”) is contemplating an acquisition of The Bear Stearns Companies Inc. (“BSC”), with a public announcement of that intention as early as later today. In connection with its evaluation of the desirability of such an acquisition, you have informed us that JPM has concerns about its potential exposure to enforcement action by the U.S. Securities and Exchange Commission (the “Commission”), should it acquire BSC, arising out of statements made by BSC in the 60 days prior to the public announcement of the proposed acquisition by JPM.
As for any investigations and potential future inquiries into BSC’s pre-announcement conduct, because those investigations and inquiries are not complete, it is impossible to conclude whether any violations of law have occurred, by whom and, if so, what actions, remedies and sanctions, if any, are appropriate. With regard to JPM, however, our recommendations to the Commission will be informed by, among other things, the principles outlined in the Commission’s October 23, 2001 Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions (the Seaboard Report) and in the January 4, 2006 Statement of the Securities and Exchange Commission Concerning Penalties. In that regard, in the event that the staff of the Division of Enforcement concludes that violations of the federal securities laws have occurred the staff will consider all of the pertinent information and circumstances in crafting any recommendations to the Commission.
Among the factors that would necessarily weigh into that analysis would be JPM’s role (or more accurately, lack of a role) in the underlying conduct, JPM’s role as acquirer of BSC, the cooperation of JPM (which you have already indicated would be forthcoming), harm to investors and others, and remediation efforts. Based on our current understanding, many of these factors weigh against a recommendation from the Division of Enforcement for an enforcement action against JPM, directly or indirectly, arising out of statements made by BSC in the 60 days prior to the public announcement of the proposed acquisition by JPM.
This letter does not address any potential enforcement actions against any other persons (including any individuals employed by BSC). In addition, nothing in this letter should be construed as reaching any conclusion as to the underlying merits of any of the matters currently under investigation or those that may be investigated in the future.
In connection with this letter, I have consulted senior staff officials in other relevant Divisions of the Commission.
Very truly yours,
Linda Chatman Thomsen
Director, Division of Enforcement
U.S. Securities and Exchange Commission
Stephen M. Cutler, Esq., Executive Vice President and General Counsel, JPMorgan Chase & Co.
Brian G. Cartwright, General Counsel, U.S. Securities and Exchange Commission
Erik R. Sirri, Director of the Division of Trading and Markets, U.S. Securities and Exchange Commission
Andrew J. Donohue, Director of the Division of Investment Management, U.S. Securities and Exchange Commission
John W. White, Director of the Division of Corporation Finance, U.S. Securities and Exchange Commission