Charlie Javice arrives at federal court in New York on July 13.
Yuki Iwamura/Photographer: Yuki Iwamura/Bloom
(Bloomberg) --JPMorgan Chase defeated for now a bid by Charlie Javice, who the bank claims defrauded it in a $175 million acquisition, to get it to pay for her countersuit.
Delaware Chancery Court Judge Kathaleen St. J. McCormick on Wednesday ruled that JPMorgan's obligation to cover the costs of Javice's defense in its fraud suit against her, as well as a separate criminal prosecution, didn't extend to her claims that the bank wrongly terminated her roughly a year after it bought Frank, her college financial planning startup.
McCormick ruled in May that JPMorgan was required to cover Javice's defense costs under the 2021 merger agreement, which made her a managing director and head of student solutions at the bank. But the judge said Wednesday that Javice couldn't "shoehorn" the legal bills for her six counterclaims into the earlier decision.
She similarly denied Javice's request that JPMorgan cover her legal bills in seeking insurance coverage, finding it also wasn't a natural extension of the May order. The judge said Javice could revise her complaint to specifically seek coverage for the other costs, and that JPMorgan could then renew its objections.
The judge did grant Javice's request for an order requiring JPMorgan to cover bills the bank had questioned as possibly inflated. McCormick said it was premature for JPMorgan to be seeking a "detailed analytical review" of the bills.
The founder of the defunct fintech that provided online college financial aid services was charged with fraud for inflating the company's customer base ahead of being acquired by JPMorgan.
Javice had claimed in an October filing that JPMorgan had improperly rejected about $830,000 of her lawyers' bills, or about 20% of her total to that date. More than half of the amount she sought, about $457,000, was attributed to her counterclaims, while nearly $100,000 was apportioned to the insurance work.
Alex Spiro, Javice's lawyer, declined to comment on McCormick's ruling. JPMorgan also declined to comment.
JPMorgan sued Javice in 2022, alleging she and another Frank executive, Olivier Amar, vastly inflated the size of Frank's customer base to convince the bank to acquire it, hiring a data science professor to falsify millions of email sign-ups. Manhattan federal prosecutors charged Javice and Amar with fraud last year, saying she was set to make $45 million from the deal.
Both have pleaded not guilty in the criminal case. Javice, who is free on a $2 million bond, has claimed JPMorgan raised the fraud allegation in an attempt to "retrade the deal." JPMorgan shut down Frank early last year.
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