JPMorgan Accused of Commodities Manipulation

JPMorgan Chase & Co. (JPM) manipulated power markets in California and the Midwest from September 2010 to June 2011, obtaining tens of millions of dollars in overpayments from grid operators, the U.S. Federal Energy Regulatory Commission alleged today.

The agency said in a Notice of Alleged Violations that it had preliminarily determined a JPMorgan trading unit had engaged in eight manipulative bidding strategies.

The New York-based bank has agreed to sanctions including a fine of about $400 million in a settlement that may be announced as early as tomorrow, according to a person familiar with the case who asked not to be identified because the terms aren’t yet public. Other sanctions may include forfeiting profits, this person said.

Brian Marchiony, a JPMorgan spokesman, declined to comment on the FERC action.

The case marks another setback for the biggest U.S.-based bank, which sailed through the 2008 financial crisis without a single quarterly loss. Last year JPMorgan lost more than $6.2 billion from wrong-way derivatives bets placed by traders in London. The incident prompted a U.S. Senate investigation, the departure of two senior executives and a debate over whether Chief Executive Officer Jamie Dimon should keep his chairman role. In May shareholders re-elected him as chairman.

Bloomberg

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