JPMorgan Chase & Co. will pay $410 million to settle U.S. Federal Energy Regulatory Commission allegations that the bank manipulated power markets in California and the Midwest from 2010 to 2012.
The bank agreed to pay a U.S. civil penalty of $285 million and return $125 million in ill-gotten profits to electricity ratepayers, according to a FERC statement today. New York-based JPMorgan, the largest U.S. bank by market value, said the settlement will “put this matter behind it.”
JPMorgan “employed a fraudulent device, scheme or artifice, made false statements or material omissions, or engaged in a course of business that operated or would operate as a fraud on electricity market participants,” the FERC said today in an order posted on its website.
The case marks another setback for JPMorgan, 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, 57, should keep his chairman role. In May shareholders re-elected him as chairman.
JPMorgan fell 18 cents to $55.51 at 10:32 a.m. in New York trading. The shares rose 27% this year through yesterday.
The FERC said a JPMorgan energy-trading unit had engaged in 12 bidding strategies in wholesale energy markets from September 2010 to November 2012, resulting in tens of millions of dollars in overpayments from the grid operators. The agency announced the violations yesterday after investigating the bank’s energy- trading practices for more than a year.
Of the $410 million, $124 million will go to the California electric-grid operator and $1 million will go to an operator in the Midwest, according to the agency. The bank accepted the facts in the settlement agreement without admitting or denying wrongdoing, the FERC said in a statement.
“We’re pleased to have this matter behind us,” Brian Marchiony, a spokesman for JPMorgan, said today in a statement. The settlement will not have a material impact on the bank’s earnings since it has previously set aside reserves to cover the costs, he said.
The settlement ends the U.S. investigation of J.P. Morgan Ventures Energy Corp., a trading unit overseen by commodities chief Blythe Masters. The wholly owned subsidiary trades and holds physical commodities, including agricultural products, metals and energy, as well as derivatives.