Feds looking for criminal acts in Chase trading

Bloomberg News

NEW YORK — A Justice Department probe of JPMorgan Chase & Co.’s energy-trading practices is examining whether criminal laws were violated by individuals, a person briefed on the matter said.

The FBI is working with U. S. Atty. Preet Bharara, the person said. Bharara’s inquiry, reported earlier this week by The Wall Street Journal and Bloomberg News, focuses on conduct outlined last month in the bank’s $410 million civil settlement with the Federal Energy Regulatory Commission. The FERC had accused the bank of manipulating power markets in California and the Midwest.

It’s the second criminal probe of the bank to emerge this month, after the lender disclosed Aug. 7 that the U.S. Attorney’s Office in Sacramento, Calif., opened a separate criminal inquiry into the firm’s mortgage-bond practices. Investigators in that case told the bank in May that they have preliminarily concluded the company violated civil laws, JPMorgan said in the disclosure.

JPMorgan’s energytrading unit, which is overseen by commodities chief Blythe Masters, engaged in 12 bidding strategies in wholesale energy markets from September 2010 to November 2012 that resulted in tens of millions of dollars in overpayments from grid operators, the FERC said while announcing the settlement on July 29.

It didn’t bring claims against any individuals. The bank publicly defended individual employees during that inquiry.

The person briefed on the FBI’s probe didn’t specify which people agents may examine. Investigators sent JPMorgan a subpoena earlier this month, according to another person with knowledge of the situation.

While the FERC deal last month released the company and its employees from future enforcement actions by the regulator, it didn’t preclude other U.S. authorities from pursuing their own inquiries.