JPMorgan mea culpa puts pacifier-making moms back in business
The North Korea scare has been averted, at least for two entrepreneurial moms who sell upmarket baby pacifiers.
The co-founders of Doddle, Nicki Radzely and Janna Badger, spent the past two weeks edging toward a financial cliff. Their business account at JPMorgan Chase had been frozen, and they didn't know why. With their workers and suppliers unpaid, and hoping to learn what had happened, the women delved into a murky world of international sanctions law and global bank compliance.
Then, on Tuesday, the co-founders got a call from their bank: Sorry, they were told, it was all a mix-up. Accounts would be unfrozen, credit lines extended. Apologies were made.
JPMorgan's shutdown of the Doddle account was the subject of a Bloomberg Businessweek profile on April 30. Its resolution hints at an untold price of stepped-up bank compliance efforts. After years of criticism — and billions of dollars in penalties — for failing to catch customers who do business with sanctioned parties, many big banks have beefed up the departments that are supposed to flag suspicious transactions. Some flags, it seems, could get thrown in error.
JPMorgan isn't saying why Doddle's account was shut down. "These were unusual circumstances that led to a misunderstanding, and we're glad we were able to get to the bottom of this," the bank said through a spokeswoman, Ashley Frost.
Radzely's odyssey began on April 18, as she was ferrying her toddlers to baseball practice in New Jersey. In a telephone call, a JPMorgan banker asked about a $2,700 wire transfer to a supplier in China that had bounced back, and whether Doddle had ties to North Korea. The company didn't, Radzely assured the banker. The next morning, she discovered that JPMorgan had put a block on Doddle's account. The bank declined to explain why. In comments to Bloomberg, it said it must follow all government regulations, including those of the U.S. Department of the Treasury's Office of Foreign Assets Control, which enforces sanctions.
Radzely and Badger — whose pacifier pops into a protective shell when dropped — struggled to keep their 14-month-old venture afloat, without access to cash to reimburse suppliers, pay their staff of mostly stay-at-home-moms or receive payments from retailers like Buy Buy Baby Inc. and Nordstrom Inc. They wondered if they'd have to halt production and a new-product launch. They called the FBI and talked with someone from Treasury's Financial Crimes Enforcement Network.
The Doddle founders say they received the Tuesday call from three JPMorgan officials, who began by again asking if the company or its suppliers did business with North Korea. After Radzely and Badger reiterated that they didn't, the bank officials apologized, offered to reopen Doddle's accounts and said the bank could draft a letter to company suppliers and vendors explaining the mix-up, the women said.
Radzely and Badger said they'd like the bank to compensate them for damages, which they haven't determined. They'd also like the bank to commit to offering small businesses a better opportunity to explain potentially suspicious activity before it takes drastic action.
"There needs to be some sharing of information and courtesy in how they speak to people before they shut them down," Radzely said.
Said Frost, the JPMorgan spokeswoman, "We apologize to Ms. Radzely and hope we can continue our banking relationship with her."