After the announcement of the latest probe by the Department
of Justice (DOJ) over the probable manipulation in the energy
JPMorgan Chase & Co
), the company's share price went down by 2.74%. This new probe
follows the company's settlement of civil allegations last month
with the Federal Energy Regulatory Commission (FERC).
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Previously, JPMorgan was charged with the manipulation of
electricity prices in California and the Midwest regions. The
company had agreed to pay $410 million, without admitting or
denying any wrongdoing. Of the total amount, $285 million was the
penalty fee and the remaining $125 million was the improper
profit that the company allegedly earned. This amount would be
returned to the ratepayers of California and the Midwest regions.
Apart from the settlement between JPMorgan and FERC, the DOJ had
decided to further scrutinize the energy practices of the
company. The case is being investigated by U.S. Attorney Preet
Bharara in Manhattan. The U.S. Attorney is expected to probe some
similar issues related to the FERC case.
The latest energy probe is expected to add to JPMorgan's legal
woes. The Wall Street biggie is already facing six other
inquiries. In May 2012, the DOJ charged the bank of violating the
civil securities laws while selling the mortgage-backed
securities between 2005 and 2007. Moreover, the DOJ has decided
to persist with its probe of the 2012 JPMorgan trading debacle,
which cost the bank over $6 billion.
In the past, many other banks have been charged with energy
trading violations. In Mar 2012, Constellation Energy Group Inc.
- a subsidiary of
) - agreed to pay $245 million for alleged energy trading
violations in New York. Moreover, in Jan 2013,
Deutsche Bank AG
) agreed to pay $1.6 million to resolve the FERC's charges,
accusing the former of manipulating the California energy markets
Furthermore, earlier this month, the FERC ordered
) to pay $488 million in fines and penalties for the alleged
manipulation of energy markets in Western U.S. from 2006 to 2008.
However, Barclays has decided to challenge the order.
The ongoing probes against JPMorgan are expected to add to its
legal expenses, which might dent its financials going forward.
Additionally, it might tarnish the company's image.
JPMorgan currently carries a Zacks Rank #3 (Hold).