JPMorgan Chase & Co., the biggest U.S. bank, was warned by federal energy-market regulators that the firm and its personnel may face claims stemming from a probe into bidding practices.
Federal Energy Regulatory Commission staff told JPMorgan in March they may recommend the agency bring an enforcement case against the bank’s employees and two subsidiaries, the New York-based company said Wednesday in a regulatory filing. Claims may include "alleged violations of FERC rules and the rules of certain independent system operators," the lender said, without elaborating on the allegations.
The regulator is boosting scrutiny of corporations as it wields policing powers that were expanded in the wake of Enron Corp.'s 2001 collapse. FERC investigators may seek to hold JPMorgan traders and commodities-unit chief Blythe Masters "individually liable," the New York Times reported last week, citing a 70-page document the watchdog sent the bank in March.
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.
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.
JPMorgan has said it intends to defend itself and the employees, and that it disputes that Masters or other personnel acted inappropriately.
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