JPMORGAN CHASE’S refusal to turn over emails in a federal inquiry of potential energy-market manipulation is the latest challenge for chief executive Jamie Dimon as the bank faces multiple investigations.
The US Federal Energy Regulatory Commission has sued JPMorgan to release 25 emails in an investigation of possible manipulation of power markets by JPMorgan Ventures Energy, according to court filings. The regulator opened the inquiry in August after complaints from California and Midwest grid operators that JP Morgan’s bidding practices were abusive, documents show.
“He’s got a PR nightmare in front of him,” said Paul Miller, analyst at FBR Capital Markets in Arlington, Virginia. “It’s another headline risk, which means more regulators, which means over-regulation, which will eventually hit their bottom line.”
The largest US bank is struggling to maintain its image as risk-averse after reporting a $2 billion loss in a London unit that Mr Dimon said “violated common sense”. JPMorgan, Citigroup and Bank of America may also get stung by an inquiry into an attempt by banks in Britain and the US to rig the London interbank offered rate, called the Libor.
JPMorgan keeps “having these little blow-ups”, said Mr Miller. “It just sounds like a culture that’s supposed to be very tight and risk-managed is not being well run.”
The regulator, which has pledged to combat manipulation of prices, said JPMorgan’s bidding techniques in California and the Midwest resulted in at least $73 million in improper payments.
It accused the bank of improperly using attorney-client privilege to withhold or redact 53 emails subpoenaed in April. The company has since released 28 of the emails, including a March 14th, 2011, exchange between commodities head Blythe Masters and her chief of principal investments, Francis Dunleavy, regarding an update on the California Independent System Operator, one of the complainants in the case.
“So in your opinion we are better off with me trying to decide this without your help?” Masters asked. After Dunleavy asked to speak directly to Masters, who wasn’t available, he said: “I will handle it but it may not be pretty.” – (Bloomberg)
