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SILENCE MAY NOT BE GOLDEN AT J.P. MORGAN CHASE

  1. http://www.nypost.com/business/48070.htm

    SILENCE MAY NOT BE GOLDEN AT J.P. MORGAN CHASE

    By JOHN CRUDELE
    --------------------------------------------------------------------------------

    May 16, 2002

    NOT too many people would recognize the name Dinsa Mehta, at least not outside the rarefied world of J.P. Morgan Chase's executive suite. But it was a rumor about Mehta's employment status at the bank that had the world gold market buzzing last week.

    For the record, Mehta is still working for J.P. Morgan Chase, where he's been for 26 years. But he is thinking of leaving after a major shake-up reduced his responsibilities as head of global commodity risk management and global foreign exchange.

    As Mehta put it to me: "I'm still here with no walk-off date in the near future." Still, the man who goes by the nickname Dan is talking like someone who wants a change, but "I'm being asked to stay."

    So Mehta may or may not leave J.P. Morgan. Got that?

    Why does the world gold community care?

    Because there have been relentless rumors that something is wrong at J.P. Morgan because of its complex financial derivatives business. And the sudden departure of someone of Mehta's stature and responsibility could signal that something is amiss with the bank's precious metals trades, gold speculators guessed.

    I've been down this path before and just about every other news organization followed with scary reports about J.P. Morgan's connection with Enron, Global Crossing, Argentina, derivatives and many of the other financial debacles that popped up around the globe. For the record, J.P. Morgan is still around.

    In fact, its stock price has been bouncing back since lows reached earlier this year when we all had the company under a microscope.

    Most of us have put our microscopes away. But mine came out when the Mehta stories surfaced on the Internet on a very credible site frequented by gold experts.

    LeMetropoleCafe.com, which is maintained by an organization called Gold Anti-Trust Action Committee, posted the following quote May 7. For the record, GATA believes governments purposely hold down the price of gold through massive selling - essentially rigging the market.

    "This morning I received a phone call from the best of sources in South Africa. The source has a friend who spent some time recently with two J.P. Morgan Chase senior bankers," wrote Bill Murphy, head of the group.

    "The friend was told by the Morgan people that they have ‘lost control of the gold market and that the gold derivative department was a mess,' " Murphy added.

    The specifics of GATA's communiqué were sort of intriguing: The gold derivatives department of J.P. Morgan Chase is being investigated, the man who ran the department has been fired (that would be Mehta) and this was discussed on CNBC Europe, but was called "still a rumor" by the program host.

    Murphy also wrote, "It appears the ‘conspiracy guys' were right all along.

    Hey, I'm cool with conspiracies. I've even told readers that the U.S. government intervened in the stock market after Sept. 11 - a fact that now seems borne out by recent admissions that the Federal Reserve used "extraordinary measures."

    And I'm even willing to believe the idea that governments would try to control the price of gold. Why not? It's easy, since governments are major buyers.

    But I wanted to get to the bottom of was this: Did J.P. Morgan really have a problem with gold that led to the shake-up?

    Mehta says no. In fact, he says that because real interest rates (rates after inflation) are so low right now, there is actually very little risk in gold trading.

    What about foreign countries interfering in the gold markets? Mehta won't discuss that.

    But he is amused by the way gold traders weave a rumor, especially about his own demise. "Conspiracy theorists are doing what they do best: provide entertainment from the sidelines," Mehta said.

    Investigations? "That's definitely not the case, bless their (the conspiracy theorists') hearts," he said.

    J.P. Morgan had no comments about most of this stuff and deferred most questions to Mehta. But the company did point out that it has reduced its work force by thousands in recent months to cut costs.

    So, what's the real reason behind the moves?

    Maybe this is the answer. A letter to J.P. Morgan Chase President William Harrison from the House Committee on Energy and Commerce asks for tons of internal documents related to the Enron investigation.

    "Please provide all records relating to communications from 1997 to the present between Vice Chairman Mark Shapiro, Vice Chairman James Lee Jr., Dinsa Mehta . . . and Ian James, reportedly a director of Mahonia Ltd.," a company connected with Enron.

    Since Mehta was one of only a handful of J.P. Morgan people singled out by Congress for special attention, maybe he wasn't such a small fry after all. No wonder the company doesn't want him to leave.

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