DOJ Picks Up Where FERC Left Off: Begins Investigation Of JPMorgan's "Enronesque" Energy Market Manipulation

On July 30, when FERC announced that it had agreed to resolve it allegations of JPMorgan manipulation of the energy market for a $410 million fine, with the bank neither admitting nor denying guilt, we posited that the only question on Jamie Dimon’s mind was whether to pay the fine from petty cash or just to charge it on his corporate Amex. Three weeks later he may have some other questions swirling in his head, such as “whose Christmas lobbying stocking did I not fill with campaign donations?” after the WSJ reported that it is no longer FERC, but the DOJ itself, led by Preet Bharara, which is investigating whether JPM manipulated energy markets.

Ironically, this is a deja vu of the SAC take down by the same Bharara, when a few months after SAC settled with the SEC it was shocked to be crushed by the Department of Justice which pulled an “Arthur Anderson” on it and for all intents and purposes shut it down (although with nobody sent to prison). It remains to be seen if Bharara will have the balls to take this prosecution to the next level and whether after he made SAC into Arthur Anderson, he will make JPMorgan into the New Normal’s Enron and whether Jamie Dimon or Blythe Masters will be the next Lay and/or Skilling. One can hope.

From the WSJ:

The Justice Department is investigating whether J.P. Morgan Chase manipulated U.S. energy markets, according to people familiar with the case, marking the latest legal hurdle for a bank already facing a mountain of litigation and regulatory scrutiny. J.P. Morgan last month agreed to pay $410 million to settle allegations raised by the Federal Energy Regulatory Commission that the bank manipulated markets in California and the Midwest. J.P. Morgan didn’t admit to wrongdoing as part of the settlement.


The Justice Department decided to examine J.P. Morgan’s energy practices in recent weeks as that settlement was being wrapped up, according to the people familiar with the probe.


The people cautioned the probe is still in its early stages and the outcome uncertain. J.P. Morgan declined to comment on the investigation.


The case, according to the people, is being handled by U.S. Attorney Preet Bharara, who earlier this month accused two former J.P. Morgan traders of hiding losses on runaway bets that cost the bank more than $6 billion. Mr. Bharara will look at some of the same issues that were at the center of the FERC case, these people said. It isn’t known if the investigation is civil or criminal. The U.S. attorney’s office for the Southern District of New York declined to comment.

Just another tempest in a teapot? Or is it becoming clear that someone in the government was less than ecstatic with Jamie Dimon wearing White House cuff links (and will Jamie wear Kremlin cuff links at his next congressional hearing)? The question, however, is whether that someone will have the courage to truly take JPM to task instead of extracting yet another $500 million “fine”, where the firm neither admits nor denies guilt, where nobody goes to prison, and where despite the Copperfieldian optics, things continue just as they are.

In the off chance that this time is different, we would not want to be in Blythe Masters’ shoes after all, especially not following today’s most recent 50,000 ounce withdrawal of gold from JPM’s (soon to be sold) gold vault.


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