JPMorgan Nearing FERC Market-Rigging Settlement, WSJ Says

JPMorgan Chase & Co., the biggest U.S. bank, is near an agreement with the Federal Energy Regulatory Commission to settle allegations that the lender rigged electricity markets, the Wall Street Journal reported.

The accord, which would resolve claims that the bank manipulated power prices in California and the Midwest, could require the largest payout in the agency’s history, according to the report, which cited people familiar with the discussions. Joseph Evangelisti, a spokesman for New York-based JPMorgan, and Mary O’Driscoll, a FERC spokeswoman, declined to comment.

Previous negotiations between JPMorgan and the regulator involved a payout figure close to $1 billion, according to the Wall Street Journal. A settlement could cost the bank $500 million, the New York Times reported today, citing people briefed on the matter.

FERC warned JPMorgan in March that its personnel and two subsidiaries may face claims stemming from a probe into its bidding practices, according to a regulatory disclosure from the bank in May. Claims may include “alleged violations of FERC rules and the rules of certain independent system operators,” the lender said at the time, without elaborating.

FERC Chairman Jon Wellinghoff has stepped up scrutiny of corporations as the agency wields policing powers that were expanded in the wake of Enron Corp.’s 2001 collapse. Wellinghoff, whose term was due to expire June 30, submitted his resignation in May. President Barack Obama asked him to stay until a new commissioner is confirmed by the Senate.

Yesterday the regulator ordered Barclays Plc and four former traders to pay a combined $487.9 million in fines and penalties for engaging in what the agency said was a scheme to manipulate energy markets in the Western U.S. from November 2006 to December 2008. London-based Barclays said it would “vigorously” fight the penalties.

Agency investigators may seek to hold JPMorgan traders and commodities-unit chief Blythe Masters “individually liable,” the New York Times reported in May, citing a 70-page document the watchdog sent the bank in March.

The FERC revoked a JPMorgan unit’s right to trade power for six months in November after accusing the firm of providing misleading information to a California energy authority. The suspension, which took effect in April, marked the first such sanction for an active market participant.

Deutsche Bank AG is among companies that have settled with FERC. The Frankfurt-based lender agreed on Jan. 22 to pay $1.6 million to resolve FERC claims that an energy-trading unit manipulated markets in 2010. The bank, Germany’s biggest, didn’t admit or deny wrongdoing.

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