One of Indianapolis' oldest church congregations sued JPMorgan Chase and Co. Wednesday in federal court, alleging the investment banker's mismanagement and self-dealing led to $13 million in losses from trusts endowed by philanthropist Eli Lilly Jr.
A complaint filed by Christ Church Cathedral in U.S. District Court in Indianapolis alleged JP Morgan Chase directed money from the trusts into 177 different investment products, mostly the banker's own, including "high-risk, high-cost, opaque, unsuitable and poorly performing investments."
The value of the trusts managed by the bank had fluctuated $35.4 million to $39.2 million from 2004 to 2007, but by last December, after the stock market had rebounded from the Great Recession, the trusts' value had dropped to $31.6 million, the complaint said. JPMorganChase resigned as the trustee of the trusts that month.
Meanwhile, JPMorgan Chase's annual fee increased more than fivefold from $35,000 to $177,800, the complaint said. The church has paid more than $1 million in fees to the bank.
"At the very highest levels of JPMorgan, decisions were made to steer clients to JPMorgan products regardless of the damage which could result to beneficiaries such as Christ Church," the lawsuit claims. "Most of the financial products found in the Christ Church Trusts' portfolio earned JPMorgan substantial revenues in disclosed and undisclosed fees."
The Indianapolis Business Journal reported that when Lilly died in 1977, he left 10 percent of his estate to the church, with management of three trusts divided among three local banks. JPMorgan Chase wound up managing two of the trusts after bank consolidation.
Christ Church Cathedral, a 177-year-old Episcopal congregation, is located on Monument Circle in the center of downtown Indianapolis. The Journal reported the church had a total endowment of $67.1 million as of December.
The Indianapolis Star reports the church was the religious home of the Lilly family. Lilly Jr., the grandson of the founder of the pharmaceutical company that bears the family name, grew up in the church. He was baptized there in 1885, sang in the youth choir and served much of his adult life as a lay church leader as he rose to head Eli Lilly and Co.
JPMorgan Chase spokeswoman Christine Holevas said the company does not comment on pending litigation.