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JPMorgan settles energy case
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JPMorgan Chase & Co agreed yesterday to pay US$410 million to settle allegations of power market manipulation in California and the Midwest, the latest in a series of high-profile inquiries by United States federal energy regulators.
The settlement, announced by the Federal Energy Regulatory Commission, will allow Chief Executive Jamie Dimon to close the books on one of several costly run-ins with regulators over the past year. It came days after the bank said it was quitting the physical commodities business.
JPMorgan Ventures Energy Corp, the commodity trading unit that became one of the biggest US electricity traders with the 2008 acquisition of Bear Stearns, agreed to pay a civil penalty of US$285 million and disgorge US$125 million for “manipulative bidding strategies” from September 2010 through November 2012.
It is the second largest penalty in FERC history, and comes as the once-quiet government regulator steps up its pursuit of market malfeasance after gaining expanded powers from Congress in 2005, part of efforts to crack down after Enron Corp’s spectacular collapse.
JPMorgan spokesman Brian Marchiony said the settlement would “not have a material impact on our earnings” because the bank had previously set aside reserves.
Dimon has moved this year to resolve multiple government investigations and correct problems regulators have found at the bank in an effort to take a more conciliatory stance as new rules are imposed more than five years after the start of the financial crisis.
As expected, the FERC deal did not cite specific traders or JPMorgan’s commodities chief Blythe Masters, who spent billions of dollars over the past five years to build JPMorgan’s oil, power, gas and metals business into the biggest on Wall Street.
FERC levied a US$470 million penalty on British bank Barclays Plc and four of its traders earlier this month.
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