JPMorgan Seeks to Stop Covering Legal Expenses for Frank Founder Charlie Javice

# JPMorgan Seeks to Stop Covering Legal Expenses for Frank Founder Charlie Javice

JPMorgan Chase is making a dramatic move to terminate its ob...

JPMorgan Chase is making a dramatic move to terminate its obligation to pay the astronomical legal bills of Charlie Javice, the founder of the college financial aid startup Frank, whose defense costs have spiraled to over $115 million since her conviction on fraud charges.[1][2] The bank's latest court filing represents a turning point in a case that has become increasingly costly and contentious, as the financial institution seeks relief from what it characterizes as egregious and abusive billing practices.

The situation stems from JPMorgan's $175 million acquisition...

The situation stems from JPMorgan's $175 million acquisition of Frank in 2021, a deal that unraveled when the bank discovered that Javice and her co-defendant Olivier Amar had allegedly fabricated millions of user profiles to inflate the startup's value.[1][5] What makes this case particularly unusual is that despite being the victim of the fraud, JPMorgan has been legally obligated to cover the defense costs of the two individuals convicted of defrauding them—a requirement rooted in the merger agreement and Delaware corporate law.

## The Delaware Court Ruling

In 2023, the Delaware Court of Chancery ruled that based on...

In 2023, the Delaware Court of Chancery ruled that based on the language in the merger agreement and Delaware law, Javice and Amar were entitled to advancement of their legal fees and expenses.[1] This decision meant JPMorgan had to shoulder the mounting costs of their defense even as criminal charges mounted. Judge Kathaleen McCormick rejected the bank's argument that Javice's alleged fraud fell outside the scope of the merger agreement, determining that the bank was legally obligated to cover the bills.[4]

## Mounting Legal Fees

The financial toll has been staggering. According to JPMorga...

The financial toll has been staggering. According to JPMorgan's recent court filings, Javice's legal team across five different law firms has billed approximately $60.1 million in fees and expenses, while Amar's lawyers have charged roughly $55.2 million, bringing the combined total to $115 million.[5] To put this in perspective, the legal fees alone represent more than 65 percent of the $175 million JPMorgan paid to acquire Frank.[1]

The scale of the legal representation is extraordinary. Javi...

The scale of the legal representation is extraordinary. Javice maintained a team of at least 19 lawyers, while Amar employed at least 16 attorneys, not to mention paralegals and support staff.[1] One law firm alone has received $35.6 million in advanced fees and expenses.[2][5] For comparison, Elizabeth Holmes, the founder of failed blood-testing company Theranos who was convicted of defrauding investors, ended up with a legal bill of roughly $30 million—less than half of what Javice's defense has cost.[5]

Notably, Javice's legal team includes Alex Spiro of Quinn Em...

Notably, Javice's legal team includes Alex Spiro of Quinn Emanuel, the same attorney who has represented Elon Musk.[5]

## JPMorgan's Arguments

In its recent court filing, JPMorgan argues that Javice and...

In its recent court filing, JPMorgan argues that Javice and her legal team have treated the advancement process like "a blank check to bill and expense whatever they please."[2] The bank contends that Javice's decision to hire five different law firms for her defense is "necessarily overlapping, duplicative, and excessive," suggesting that the arrangement was designed to run up costs rather than mount an effective defense.[2]

JPMorgan's lawyers argue that the bank will be "irreparably...

JPMorgan's lawyers argue that the bank will be "irreparably injured" unless the court puts a stop to what they characterize as "abusive billing."[2] The filing represents the bank's most aggressive push yet to escape its legal fee obligations, signaling frustration with the seemingly endless accumulation of costs.

## Criminal Convictions and Sentencing

The legal battles intensified when the Department of Justice...

The legal battles intensified when the Department of Justice brought criminal charges against both Javice and Amar in 2023, resulting in convictions.[1] Last month, the court sentenced Javice to prison for securities fraud and other violations, ordering her to forfeit over $22.3 million and requiring both defendants to pay over $287 million in restitution.[1]

Judge Hellerstein, who presided over the criminal case, incl...

Judge Hellerstein, who presided over the criminal case, included the $115 million in legal fees in his restitution order.[1] However, Javice recently filed a motion requesting that the court reconsider that portion of the restitution order, further complicating the financial picture.[1]

## Lessons for Corporate Acquisitions

The case has raised important questions about how companies...

The case has raised important questions about how companies should structure merger agreements and advancement of legal fees provisions. Legal experts have noted that Delaware law treats advancement as a distinct contractual right from indemnification, and Delaware courts have a well-established policy favoring advancement for officers and directors.[3] As the Javice case demonstrates, even a fraud conviction may defeat ultimate indemnification but won't necessarily eliminate the obligation to advance defense costs through trial and appeals.[3]

The outcome of JPMorgan's current motion could have signific...

The outcome of JPMorgan's current motion could have significant implications for how companies structure future acquisitions and what protections they build into merger agreements to protect themselves from precisely this kind of scenario.