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Saturday, June 23, 2018

Nov. 22 (Bloomberg) — For years the public has vented about half-baked government settlements in which corporations and white-collar defendants “neither admit nor deny” the allegations against them. The Justice Department wasn’t about to go down that path when it unveiled its big, not-really-$13 billion deal this week with JPMorgan Chase & Co.

So the government made a few sly tweaks. The result is a mutant offspring of the no-admit genre that may be even less satisfying than the parent. JPMorgan didn’t have to admit to any violations of the law. And here’s the rub: The Justice Department didn’t allege any, either.

According to the settlement agreement, the bank will pay a civil penalty “pursuant to” a statute called the Financial Institutions Reform, Recovery and Enforcement Act. However, the Justice Department didn’t lodge any claims against JPMorgan for breaking that law or any other. This was an out-of-court settlement. The Justice Department didn’t file a complaint. No judge’s approval was needed.

The agreement did incorporate an 11-page statement of facts that explained in vague terms what JPMorgan did. Yet none of the acknowledgments by JPMorgan in that document hurt the bank. JPMorgan didn’t admit liability or even any mistakes. That’s no better than the old “neither admit nor deny” boilerplate.

This isn’t justice. It’s more like the greenmail that companies sometimes pay to corporate raiders who demand premium prices for their shares in exchange for going away. No individuals got pinched. We don’t know much about the details of what the Justice Department’s investigation found. It’s unclear why prosecutors didn’t accuse JPMorgan of fraud, although one possible explanation is that the government lacks proof.

The wording of the settlement agreement was awkward at times, too. It said the Justice Department had investigated the mortgage-bond operations of JPMorgan and two failing companies that it bought: Bear Stearns Cos. and Washington Mutual Inc. “Based on those investigations, the United States believes that there is an evidentiary basis to compromise potential legal claims by the United States against JPMorgan, Bear Stearns and Washington Mutual, for violation of federal laws,” the agreement said.

That line makes it seem like the U.S. doubted its own case, although perhaps it was just poorly drafted. The sentence would have made more sense if it said there was enough evidence to “bring” claims against JPMorgan, not “compromise” them. Maybe the prosecutors were trying to say they believed there was sufficient evidence to merit a settlement. But that doesn’t make much sense, either: The act of settling speaks for itself.

As an aside, it’s fitting that Massachusetts attorney general Martha Coakley took part in the same accord. Of the $13 billion headline figure — which combined the Justice Department’s $2 billion penalty with the amounts secured by several state and federal agencies — the settlement agreement earmarked about $34 million for Massachusetts.