J.P. Morgan Under Regulatory Fire Over Power Trading
J.P. Morgan Chase’s (NYSE:JPM) regulatory headaches appear to be turning into a very painful migraine.
In addition to ongoing probes into credit cards and its relationship with Ponzi schemer Bernie Madoff, J.P. Morgan reportedly faces a potential investigation by the top U.S. energy market regulator.
Investigators determined that the nation’s largest U.S. bank devised “manipulative schemes” that turned “money-losing power plants into powerful profit centers” and one senior exec gave “false and misleading statements” under oath, The New York Times reported, citing a confidential government document sent to J.P. Morgan in March.
The Federal Energy Regulatory Commission, or FERC, plans to recommend that the agency pursue an action against J.P. Morgan over the bank’s trading in California and Michigan electrical markets, the Times reported.
In particular, FERC investigators have found that top J.P. Morgan exec Blythe Masters “falsely” denied under oath her awareness of schemes carried out by a group of energy traders in Houston, the paper said.
J.P. Morgan, which has until at least the middle of May to answer FERC’s accusations, could face fines if a majority of the agency’s five-member commission decides to endorse the case, the Times reported.
“We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter," the bank said. "We intend to vigorously defend the firm and the employees in this matter.”
The energy probe highlights the mounting legal and regulatory troubles at J.P. Morgan, which prior to the London Whale trading debacle last year had been portrayed by Washington as model citizen on Wall Street.
It remains to be seen how these headaches may impact influence investor enthusiasm for J.P. Morgan given the bank’s continued profit growth.
Shares of J.P. Morgan have rallied 10% so far this year, underperforming the S&P 500’s 13.3% advance. Likewise, the bank gained 0.46% on Friday, compared with the broader index’s 1.09% rally to all-time highs.
The Office of the Comptroller of the Currency is considering new enforcement actions against J.P. Morgan over how it collected credit card debt and a potential failure to flag suspicions about Madoff’s scheme, the Times reported.
The OCC discovered J.P. Morgan had been using faulty documents when pursuing lawsuits against delinquent customers, the paper said.