Energy manipulation inquiry piles pressure on JP Morgan
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Wednesday 21 August 2013
Federal lawyers in the US are looking into whether JP Morgan manipulated domestic energy markets, in the latest legal headache for the banking giant.
The Department of Justice (DoJ) is said to be investigating issues similar to the ones raised by the US Federal Energy Regulatory Commission, which settled allegations against the bank last month. In a deal with the regulator over claims of market manipulation arising from a JP Morgan unit's bidding activities in the Californian and Midwest energy markets, the bank agreed to pay $410m (£260m) without admitting or denying any violations. The allegations were seen as a blow to the reputation of one the bank's most senior executives, Blythe Masters, who heads its commodities business.
Now, according to The Wall Street Journal, the issues are being re-examined by Preet Bharara, the US Attorney for the Southern District of New York. Mr Bharara's office declined to comment yesterday. A JP Morgan spokesman did not immediately respond to a message seeking comment.
The investigation is the latest in a series of legal and regulatory issues that have kept the bank in the headlines for the wrong reasons. Earlier this week, reports emerged of an inquiry into the bank's hiring practices in China, with US officials said to be looking into whether JP Morgan breached anti-bribery standards by giving jobs to the offspring of Chinese leaders.
The bank is also said to be negotiating with the US Securities and Exchange Commission over a possible settlement related to an investigation into the botched "London Whale" trades, which landed JP Morgan with more than $6bn in losses. Last week, Mr Bharara brought criminal charges against two former JP Morgan traders in connection with the trades, accusing them of conspiracy to falsify books and records, to commit wire fraud and to falsify filings with the SEC.
The bank is also facing legal scrutiny over its activities in the mortgage market. In a regulatory filing earlier this month, it revealed that it is being investigated by both the civil and criminal arms of the DoJ in connection with offerings of mortgage-backed securities. "In May 2013, the firm received a notice from civil division stating that it has preliminarily concluded that the firm violated certain federal securities laws in connection with its subprime and Alt-A residential MBS offerings during 2005 to 2007," it said, adding that it was responding to the investigations, which are being handled by the US Attorney's office for the Eastern District of California.
The various issues have the potential to re-ignite concerns about management practices and oversight at the sprawling lender. It could also renew questions about the leadership of Jamie Dimon, JP Morgan's chairman and chief executive, who found himself under a harsh spotlight last year as the bank dealt with the fallout from the "London Whale" scandal.
In focus: Other issues
Energy market manipulation
The Attorney for the Southern District of New York is said to be examining whether JP Morgan manipulated domestic energy markets.
Regulators are looking into whether the bank offered jobs to the children of senior Chinese politicians to secure lucrative business deals – something that, if proved, could be seen as bribery.
The bank is negotiating with the SEC over the regulator's investigation into the "London Whale" trades. The SEC is said to be pressing for an admission of wrongdoing.
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