NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) said that it will restate its first-quarter earnings as a result of a an attempt to hide losses at its Chief Investment Office, a unit of the bank that invests excess deposits. The nation's largest bank by assets also said it would restate first quarter earnings by $459 million, according to a filing with the Securities and Exchange Commission. In the first quarter, JPMorgan earned a profit of $5.3 billion on $26.7 billion in revenue. "The firm has recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter," JPMorgan said in the filing. Previously, JPMorgan reported that the CIO unit had lost $2 billion with the prospect that losses could grow by billions more, as it worked to unwind the large position in illiquid credit derivatives. In second quarter earnings, the bank said its CIO losses now total $4.4 billion. "As a result, we are no longer confident that the trader marks reflected good faith estimates of fair value at quarter end and we decided to remark the positions utilizing external "mid-market" benchmarks, adjusted for liquidity considerations." "
We have determined that there was a material weakness in our internal control over financial reporting at March 31, 2012 related to CIO's internal controls over valuation of the synthetic credit portfolio, " the bank said in the filing. "The control deficiencies were substantially remediated by June 30." In the filing, JPMorgan said that internal controls related to the restatement and trading loss had initially failed, but that it has since remedied lingering issues. About the restatement, chief financial officer Douglas Braunstein and Mike Cavanagh -- an executive charged with leading an investigation of the CIO as its losses were recognized by JPMorgan in May -- said in a media call that the bank decided on the restatement after investigating tens of thousands of voice records and millions of emails regarding the CIO's operations. Separately, JPMorgan said that it had clawed back severance pay and 2011 bonuses for three key London-based traders and executives in its CIO unit. Chief Executive, Jamie Dimon said in an investor call that the unit's former head Ina Drew voluntarily withdrew most of her compensation, and added that he had "enormous respect" for the longtime executive. In second quarter earnings, JPMorgan reported adjusted earnings of $1.09 a share, beating estimates, on higher than expected revenue of $22.9 billion. However, the bank benefitted from a one-time $2.1 billion release of loan loss reserves at its consumer lending operations, which outweighed investment banking unit results that were in-line with expectations. Overall, the bank reported a second-quarter profit of $5 billion, down 9% from this time in 2011. Analysts polled by Bloomberg had estimated that the bank would earn 76 cents in EPS on $21.6 billion in revenue. Excluding DVA, JPMorgan's profit was $1.09, beating estimates; however that number included 42 cents in one-time EPS gains from loan-loss reserve cuts and a Bear Stearns-related gain. -- Written by Antoine Gara in New York