JPMorgan's Latest Guilt-Free Payoff
There was that awful phrase again, in JPMorgan Chase & Co.'s settlement with U.S. energy regulators: The company "neither admits nor denies the violations." Once again, the bureaucrats deserve as much scorn as the accused.
The $410 million pact between JPMorgan and the Federal Energy Regulatory Commission doesn't do much good for the rest of us. The agency's enforcement division alleged that a subsidiary, JP Morgan Ventures Energy Corp., manipulated electricity markets in California and the Midwest from 2010 to 2012, and intentionally committed fraud. You can take the government at its word if you like. What counts is that JPMorgan didn't admit to breaking the law. We don't know whether it did, because the allegations weren't proven.
For years the Securities and Exchange Commission has been the agency that gets the most criticism for these sorts of "no-admit" settlements. The SEC has long defended their use by pointing, in part, to the many federal agencies that routinely do the same thing. The energy regulators just gave the SEC a new high-profile example.
Most frustrating of all is that the public is left to wonder why the allegations against JPMorgan are merely civil and not criminal. Maybe the evidence falls short of proof beyond a reasonable doubt, in which case prosecutors wouldn't be interested. Even if they had the goods, it's probably foolish to think the Justice Department would ever press criminal charges against a too-big-to-fail bank such as JPMorgan. (Hedge funds are fair game, of course.)
Still, intentional fraud is intentional fraud. The term is synonymous with lying, cheating and stealing. If that's what JPMorgan did supposedly, and the public was harmed, then the public deserves some sort of explanation for why no one is being indicted. Keep in mind: The allegations cover JPMorgan's conduct as recently as 2012. That date is important because in July 2011 JPMorgan entered into a non-prosecution agreement with the Justice Department's antitrust division in which the company promised that for two years it would "commit no violation of any United States federal criminal law." (JPMorgan on that occasion admitted that certain employees at its municipal derivatives desk "entered into unlawful agreements to manipulate the bidding process and rig bids on certain relevant municipal contracts.")
In this case, there weren't even any civil claims filed against any of JPMorgan's employees, as if the fraud were conceived immaculately. The company wrote a check, and now all the folks there can get on with their lives, although some may soon have a new employer once JPMorgan finishes selling its commodity-trading businesses.
At least the SEC's new chairman, Mary Jo White, is trying to talk a better game. Last month she said the SEC's enforcement division will seek more admissions of liability as a condition of settling cases. The agency hasn't resolved any cases this way yet. But I believe her when she says she hopes to.
"There may be particular individuals or institutions where it is very important it be a matter of public record that they acknowledge their wrongdoing, and if not you go to trial," White said at a conference last month.
If the energy regulator believes that JPMorgan violated the law, it should have made the company admit liability as a condition of settling. Now we're left to guess if what JPMorgan did was illegal in any way and not just business as usual.
(Jonathan Weil is Bloomberg View columnist. Follow him on Twitter.)