New York Times Report For JPMorgan Chase & Co. (NYSE:JMP)
As per the report, the source of the news is a 70-page government document that was sent to JPMorgan Chase & Co. (NYSE:JPM) in March. The report criticized Blythe Masters, who is the bank’s current head of global commodities and former chief financial officer.
The bank claims that none of their employees did any wrong in connection to trading in California and Michigan electricity markets.
As per the document, investigators from the Federal Energy Regulatory Commission (FERC) found JPMorgan Chase & Co. (NYSE:JPM) devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers.”
The document also mentioned that Masters “falsely” denied under oath whether or not she had the knowledge of the manipulation done by the traders in Houston.
However, JPMorgan Chase & Co. (NYSE:JPM) spokeswoman Jennifer Zuccarelli strongly denied such accusations, saying neither Blythe Masters nor any employee of the bank have said or done any wrong, and said “We intend to vigorously defend the firm and the employees in this matter.”
JP Morgan has been given until mid-May to respond to the accusations, according to the New York Times.
Earlier in November, FERC called a temporary ban on JPMorgan Chase & Co. (NYSE:JPM)’s physical power trading after the bank failed to reveal some of the information, related to a market manipulation probe, to the FERC and the California ISO, the regulator of the state’s power grid. The ban barred the bank for six months from trading power at the market- based rates.
One of the FERC investigators reported that the claims have been leveled only after months of probing into the bank’s trading in power markets. FERC’s investigative powers were enhanced after the high profile case concerning Enron a decade ago. For a similar trading activity that ocurred in California, the regulator called a record fine of $470 million on Barclays PLC (NYSE:BCS) (LON:BARC) in October last year.
It’s a general norm that, for imposing a fine or penalty, FERC should issue a public show-cause order. There has been no such order issued yet in this case. In the Barclays PLC (NYSE:BCS) (LON:BARC) case, FERC did issue a show-cause order accusing the banks traders of manipulating the California power market from late 2006 to 2008. The British bank at the time denied the allegations and said it would defend the allegations against it, if FERC came up with a final order asking for a fine. Until now, there has been no final order yet from FERC.
In another case, FERC issued a show cause order, in September last year, alleging Deutsche Bank AG (NYSE:DB) (ETR:DBK) of manipulating the California power market from January to March 2010. The German bank, after denying the claims initially, settled the case in January.