Originally published in the Corporate Legal Times on March, 2005
By: Cathleen Flahardy
J.P. MORGAN Chase & Co. made headlines in January when it issued an apology on its Web site. After conducting extensive research, the financial institution discovered two of its now-defunct predecessor banks_Citizens Bank and Canal Bank, both based in Louisiana_had allowed its customers to use slaves as collateral on loans between the 1830s and the Civil War.
The statement, signed by CEO William B. Harrison and COO Jamie Dimon, said J.P. Morgan was sorry for contributing to a "brutal and unjust institution" and outlined how it planned to repair the damage. But it wasn't out of the kindness of its heart that the New York-based company owned up to its past involvement with slavery. The impetus was the city of Chicago.
In 2003, Chicago passed the Slave Era Disclosure Ordinance, which requires any company wanting to do business with the city to research whether or not it has ever benefited from slavery. If the company truthfully discloses its past ties to slavery, the city will not penalize it. But if the company doesn't conduct the research or lies about what it found, the city will void any contracts it has with that company and will not do business with that company in the future.
"Although one other company had admitted to having ties to slavery, J.P. Morgan's is by far the most substantive disclosure the city has seen yet," says Jennifer Hoyle, director of public affairs for Chicago's department of law. "And because J.P. Morgan satisfied its requirements under the ordinance, it will not suffer any penalty."
Alderman Dorothy Tillman of Chicago's 3rd Ward created the ordinance and introduced it to the Chicago City Council in 2002. "The slave trade and the way descendants of enslaved Africans in America have been treated is terrible," she says. "We have a right to reparation from corporate America."
Tillman isn't the only one who feels this way. Since Chicago passed its ordinance, Los Angeles and Wayne County, Mich., which includes Detroit, have passed similar ordinances. And Tillman says New York is currently looking into implementing a slavery disclosure law as well.
Companies required to provide disclosures may have their work cut out for them_especially if J.P. Morgan's experience says anything about the process.
Skeletons In The Closet
J.P. Morgan hired Maryland-based History Associates Inc. to look into the company's history. After 3,500 hours of research in 2004, it discovered Canal and Citizen served as banks to plantations in the mid-1800s and, according to J.P. Morgan's apology, the banks "accepted approximately 13,000 enslaved individuals as collateral, and [they] came to own 1,250 enslaved individuals as a result" of defaults.
The two banks merged in 1924, but that company went under during the Depression. The National Bank of Commerce in New Orleans, a federally chartered bank, assumed some of the failed bank's assets in 1933. The National Bank of Commerce was a predecessor of BankOne, which J.P. Morgan purchased last year.
"We apologize to the African-American community, particularly those who are descendants of slaves, and to the rest of the American public for the role that Citizens Bank and Canal Bank played," the apology reads. "The slavery era was a tragic time in U.S. history and in our company's history. Today, J.P. Morgan Chase is a very different company than the Citizens and Canal Banks of the 1800s."
As a part of its effort to make amends, the bank announced it would implement a scholarship fund called Smart Start Louisiana. The company will provide $ 5 million over five years for full-tuition undergraduate scholarships to African-American students from Louisiana to attend college in the state. It will also offer those students summer internships and possibilities for employment upon graduation.
For the most part, the Chicago community is lauding J.P. Morgan for its disclosure.
"J.P. Morgan did what it was required to do under the statute," says Jane McFetridge, a partner at Fisher & Phillips in Chicago. "It was a very time-consuming and expensive undertaking on its part. And it's an example of a company being a good corporate citizen."
But not everyone agrees.
On A Mission
According to Tillman, J.P. Morgan was simply fulfilling an obligation to the city. And she wants more.
"Corporate America owes the African-American people a debt," she says. "And we need to figure out how, collectively, we are going to rebuild our communities. America will not move forward without dealing with us."
Tillman says she has 12 companies that do work with Chicago on her radar that she believes have ties to slavery. She declined to disclose who they are, but says she is pressuring them to come clean.
"Most companies in America have some ties to slavery," she says. "So I expect many more will come forward with disclosures."
J.P. Morgan wasn't the first company in Chicago to disclose its slavery ties. In November 2003, Lehmen Brothers Holdings, a New York-based investment banking company, informed the city that three of its founding brothers in the 1850s purchased a slave named Sally, and they may have owned more.
But Tillman isn't content with that disclosure.
"I believe the Lehman Brothers were much more involved with slavery than they have admitted," she says. "And I think they got their way around the law." Tillman has implored the company to continue its research. And she doesn't plan to let up until Lehman Brothers makes an accurate disclosure, she says.
Tillman believes the efforts on the part of some companies, especially J.P. Morgan, are a good start, but they still needs to do more.
"J.P. Morgan's disclosure is certainly not a victory in what we need," she says. "We will continue to meet with them and encourage them to put a national fund together to support all the African-Americans in the United States, not just in Louisiana."
That said, Tillman does commend the company for paving the way for others that must follow in its footsteps.
"What J.P. Morgan has done is it has told other companies, 'Let's deal with this,'" she says. "It has set the bar and said, 'We can't run.' They have started repairing the damage. But they still have more to do."3