Frank founder Charlie Javice said JP Morgan CEO Jamie Dimon was “personally” invested in seeing through the bank’s $175 million acquisition of the student-focused startup.
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In a response to JP Morgan’s federal fraud complaint in U.S. District Court in Delaware, the 30-year-old founder said the bank had full knowledge of Frank’s customer data before the acquisition—and Chairman Jamie Dimon personally pushed for it to happen.
Frank founder Charlie Javice on Monday denied allegations from JP Morgan that she had lied about the scale and success of her student financial aid startup to con the bank into buying it for $175 million. In a response to the bank’s complaint, filed in U.S. District Court in Delaware, she said she was clear about the size of Frank’s customer base, and that there was interest from the highest levels of the financial firm—including from CEO Jamie Dimon himself—in seeing the deal through.
“This lawsuit is the culmination of a massive ‘CYA’ effort by those responsible inside JPMC to shift the blame for a failed and now-regretted acquisition to someone they view as an easy target: its young female founder,” Javice’s response reads. “But JPMC’s core claims in this lawsuit are even more implausible than they are meritless, and Ms. Javice brings these counterclaims to hold JPMC accountable for its unlawful conduct against her.”
JP Morgan had accused Javice of misrepresenting that millions of students had signed up to use Frank’s tool which simplifies a form known as the Free Application for Federal Student Aid, or FAFSA. The bank alleged that she’d hired a data science professor to help her fabricate more than 4 million bogus accounts to pass off as real students that Frank had ushered through the FAFSA process. Javice’s response describes a due diligence meeting in which she claims to have clearly explained that 4.25 million students visited the Frank website, while approximately 350,000 students had used it to file FAFSA.
“Frank had approximately 4.25 million users drawn from the diverse demographic group that JPMC sought to access who utilized and visited the website’s free FAFSA® resources, and within that group had a much lower number of registered users who had signed up for FAFSA® accounts,” the response argues. “And, indeed, it wasn’t surprising at all. JPMC understood all of this before purchasing Frank.” The response also notes that had Frank’s numbers been as high as JP Morgan accused Javice of claiming they were, “this would have indicated a leading market share and called for a valuation… that would have exceeded many multiples of the offer price.”
Javice also claims that Dimon “personally” set his sights on her business because it had penetrated a student market that JP Morgan had long struggled to break into. Dimon has since publicly derided the deal as “a huge mistake,” and now JP Morgan is cleaning up a very public mess.
“Interest in Frank came directly from the top: the Chief Executive Officer of JPMorgan, Jamie Dimon, and Co-Chief Executive Officer of JPMC, Jennifer Piepszak, were both very eager to get the deal done,” the response says. “During the first diligence session [in early July 2021], Mr. Dimon met with Ms. Javice to express considerable excitement at the prospect of the deal. … He was eager to buy Frank. Wanting to close around the start of the school year and before the start of the college application season, he told Ms. Piepszak that she had the cash and balance sheet to make it happen. So she did.”
The response goes on to describe a deep, thorough due diligence process by JP Morgan that included “extensive” questions, “more than 1,300 separate requests,” and sessions that “were routinely attended by dozens of people”—suggesting that JP Morgan had gone into the merger with ample information, and not with a blanket pulled over its eyes.
“As we have stated from the beginning, our legal claims against Ms. Javice and Mr. Amar are set out in our complaint, along with the key facts,” JP Morgan spokesperson Pablo Rodriguez said in an emailed statement. “We stand behind our allegations, and this dispute will be resolved through the legal process.”
The former Frank CEO has asked the court for a trial before a jury. “Ms. Javice is only thirty years old,” says the response. “The damage wrought by JPMC’s falsehoods is likely to be life-long.”
Source: https://www.forbes.com/sites/alexandralevine/2023/02/27/frank-charlie-javice-denies-jp-morgan-allegations-jamie-dimon/