JPMorgan Energy Traders May Face FERC Case, N.Y. Times Says
JPMorgan Chase & Co. (JPM) was warned by U.S. energy-market authorities that they may take action against its employees as part of an inquiry into bidding practices, the New York Times said, citing a document it reviewed.
Enforcement officials at the Federal Energy Regulatory Commission plan to recommend the agency hold traders and commodities-unit chief Blythe Masters “individually liable,” the newspaper reported, citing a 70-page document the agency sent the New York-based bank in March. Investigators said Masters falsely denied awareness of problems, the Times said.
The case focuses on eight “schemes” adopted by traders in Houston between September 2010 and June 2011, according to the newspaper. The traders offered energy at prices “calculated to falsely appear attractive,” prompting state authorities in California and Michigan to make about $83 million in “excessive” payments to JPMorgan, the Times cited investigators as saying.
“The staff is challenging a bidding strategy that was transparent and was in full compliance with the applicable rules,” the Times quoted Kristin Lemkau, a spokeswoman for the bank, as saying. “We strongly disagree with the staff’s conclusions.”
JPMorgan intends to defend itself and the employees, she told the newspaper. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”
Lemkau and Mary O’Driscoll, a spokeswoman for the FERC, declined to comment when reached by Bloomberg News.
Congress expanded the agency’s enforcement authority in 2005, partially in response to trading by Enron Corp. employees that disrupted California’s energy markets earlier in that decade. Within the past two years, FERC has made public 13 inquiries into alleged market manipulation, including probes of trading units at Deutsche Bank AG and Barclays Plc.
Deutsche Bank agreed to a $1.6 million settlement Jan. 22, backing away from from a previous assertion that it was prepared to challenge fines in court. A unit of the bank, accused of making manipulative trades in early 2010, neither admitted nor denied wrongdoing, according to the commission.
It’s unclear whether the FERC will file an action against JPMorgan, the Times said. The bank has until at least mid-May to respond to the accusations in the document, and a majority of the five-member commission must first back the case before claims may be brought. If the FERC proceeds, it could seek to fine the bank and Masters, according to the newspaper.
While Masters was “less involved in the day-to-day decisions,” investigators said she got e-mails and presentations outlining the trading strategies, the publication reported, citing the document.
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