JP Morgan Chase announced its long-awaited second-quarter earnings today, but also admitted that its first-quarter statements were completely wrong, because some of their employees were deliberately trying to hide their losses. The firm, which had already been shaken by reports of billions of dollars of losses by their Chief Investment Office, now says that "certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter." That's not good.

Overall, the company did quite well, making $5 billion in Q2 for an earnings number of $1.21 per share. The company has also determined that final value of the losses suffered in the last quarter by the CIO and its "London Whale" trader was $4.4 billion, roughly twice what they original estimated when the losses were discovered in May.

However, the surprising news is that their earnings for the first quarter were seriously overstated, not by accident, but by a deliberate attempt by traders to hide losses. The company lost about $459 million more in Q1 than previously believed, bringing their total from the CIO trades to $5.1 billion. Those certain individuals were "cooking the books," as CNBC's Andrew Ross Sorkin put it. Intentionally filing false reports with the SEC is against the law and may open up the company and some of its employees to criminal as well as civil charges.

This is both good and bad news for the firm. The bad news is that it exposes their oversight and risk management operations to be shoddy and ineffective. No one seems to have had any grasp of who was trading what or how much money was involved in a significant portion of their business. That's a serious problem that must be corrected. The good news is that for top executives like CEO Jamie Dimon, it looks less like the giant losses are the result of their incompetence and more like they were duped by bad actors. Dimon told Congress last month that he believed that no one acted improperly — which seems silly to state after a massive billion-dollar screw up — but now he can argue that he was being misled by a few rogue individuals. Better to look gullible than foolish, we suppose. 

The firm also said in today's announcement that it has "completely overhauled CIO management and enhanced the governance standards within CIO" and the CIO will no longer trade "synthetic credit." A report also came out earlier this morning that the man primarily responsible for the $5 billion in losses —the  "London Whale" himself, Bruno Iksil — is no longer with the company

So have they cleaned up their act and eliminated all the problem employees? Or is Dimon blind once again to his own faults and are there more surprises awaiting JP Morgan down the road?

Update: CNBC is liveblogging the JP Morgan earnings call.