(Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon pushed to acquire college-loan-planning site Frank out of fear that another bank was eyeing the the company, its founder said. 

Frank founder Charlie Javice made the allegation about Dimon on Monday in her formal response to JPMorgan’s suit claiming that she defrauded the bank in the $175 million acquisition. According to JPMorgan, she created fake user data to vastly inflate the number of people supposedly using her site.

Javice claimed in her filing in federal court in Delaware that she was being scapegoated for the bank’s faulty due diligence and that it was JPMorgan that asked her to come up with “synthetic data” on Frank users.

The bank has launched a “massive” smear campaign by unfairly painting Javice as a confidence woman who duped JPMorgan executives into greatly overpaying for Frank, Javice’s lawyers said in the filing in Delaware federal court.

“How could one of the most powerful and sophisticated companies in the world fall for such an alleged scam?” Javice’s lawyers asked in the filing. “The answer: it couldn’t have. And didn’t. JPMC knew exactly what it was getting when it bought Frank.”

‘Shift the Blame’

Executives within the bank involved in the Frank deal now seek 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 lawyers said in the filing in federal court in Delaware.  

“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,” Pablo Rodriguez, a JPMorgan spokesman, said in an emailed statement. “We stand behind our allegations and this dispute will be resolved through the legal process.” 

JPMorgan sued Javice and Olivier Amar, another Frank executive, claiming the pair vastly inflated the number of students that had accounts on the now-defunct site and provided phony customer lists. Javice and Amar were fired from the bank after an internal probe uncovered what JPMorgan claims was fraud during the deal negotiations.

Javice said Monday that the deal came together quickly in August 2021 because JPMorgan suspected earlier in the summer “that one of its banking competitors” was eyeing a possible deal for the site.

‘Directly From the Top’

“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,” Javice said.

In its suit, JPMorgan said it launched its probe after only 28% of its emails to Frank’s customer list were delivered. JPMorgan claims it discovered that Javice and Amar hired a college professor to fake data showing Frank had more than 4.2 million customers who’d created accounts seeking help completing the government’s Free Application for Federal Student Aid (FAFSA). In reality, Frank had fewer than 300,000 customers, the bank claims.

Javice’s lawyers on Monday denied that Javice and Amar deceived JPMorgan. They said that the 4.2 million number related to students who’d clicked on the site for help in applying for financial aid and reviewing “thousands of pages of free website content concerning access to education and financial literacy.”

The bank’s executives were attracted to “access to this broader group of young, diverse users who trusted Frank as a content provider and frequented its site and offerings,” the filing added. At the same time, Javice and Amar “touted that the company had helped over 350,000 people access financial aid” on Frank’s web site, the lawyers argued.

JPMorgan Demands

Javice claims she warned JPMorgan executives that, because of privacy issues governing students’ information, the bank wouldn’t be able to see the actual names and emails of Frank users. She contends the bank then demanded Javice and Amar provide so-called “synthetic data” about users JPMorgan could access.

Such data often is used to “provide organizations with deeper insights into consumer behavior,” Javice’s attorneys said in the filing. “By definition, to be useful the goal is that the synthetic data looks as realistic as possible in order to accurately mirror the attributes of the underlying real data population.”

That was the reason Javice and Amar hired the college professor, they said, further contending that a third-party hired to review due-diligence material in the deal signed off on it. 

“The project was accomplished quickly at JPMC’s insistence — over a couple of days and nights just prior to the signing of the Merger Agreement,” the brief added.

Javice — who is suing to have JPMorgan cover her legal fees in the dispute — wants a judge to find the bank violated her employment agreement through her pretextual firing and order it to pay a $20 million incentive payment it nixed as part of her firing, according to the filing.

The case is JPMorgan Chase Bank v. Javice, 22-cv-01621, US District Court, District of Delaware (Wilmington)

©2023 Bloomberg L.P.