JPMorgan may face record $1 billion fine for energy market manipulation

Giuseppe Macri Tech Editor
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Top Wall Street bank JPMorgan Chase will pay the largest settlement in Federal Energy Regulatory Commission history for fraudulently fixing energy market rates, the Wall Street Journal reports.

The nation’s biggest bank could face a fine close to $1 billion to settle claims of rigging energy prices in California and Michigan in a scheme similar to the one that brought down Enron in 2001.

A regulatory disclosure released by the bank in May shows that the FERC informed the bank as early as March that it could face an investigation of “alleged violations of FERC rules and the rules of certain independent system operators” in regard to its energy bidding methods.

The March warning states the agency will hold Blythe Masters, traders and commodities unit chief for JPMorgan, individually liable. The Journal cited “people familiar with the talks,” as its source, and noted both JPMorgan and the FERC declined to comment.

JPMorgan is in the midst of a six-month ban on its energy trading issued by the FERC that took effect in April after it was accused of supplying false information to an energy authority in California last November.

The FERC yesterday leveled a similar charge against British banking and financial services company Barclays and four other former traders for energy market manipulation between 2006 and 2008 in the western U.S. Those banks were ordered to pay a total of $487.9 million in fines.

Rigging energy markets is only the latest in scandals and violations that have cost JPMorgan $16 billion in litigation costs between the height of the housing and financial crisis in 2009 and into 2012. At least eight federal agencies are actively investigating JPMorgan Chase practices.

Chief executive and chairman Jamie Dimon recently retained both of his titles at the top of JPMorgan, despite rumblings of a shareholder coup in the wake of the bank’s “London Whale” scandal — where it lost $6 billion while investing in risky credit derivatives. Trading in derivatives and swaps where part of the rampant practices that led to the recent housing and financial crisis.

Long hailed as head of the “good bank,” as well as the recipient of praise from President Barack Obama, rumors circulated on Capitol Hill as recently as 2011 of the possibility of Dimon heading the Treasury Department.

Some bank executives have reportedly disputed the FERC allegations, and it is undetermined at present if any settlement with the FERC will mandate an admission of guilt by JPMorgan.

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