JP Morgan Chase & Co. (JPM) ripped off utility providers, and now they’re being forced to pay it back. Following a probe by the U.S. Federal Energy Regulatory Commission that found the company manipulated energy prices in California and the Midwest, the financial giant has agreed to pay over $410 million in fines.
The fine is a small inconvenience for the largest bank in the world, who will pay $285 million back to the US government, $124 million to electric grid operators in California, and $1 million to a Midwest operator. JP Morgan had been accused of artificially driving up prices by engaging in various price fixing schemes to artificially inflate the prices utility customers would pay for electricity.
Despite being one of the only financial powerhouses to never lose money during the 2008 financial crisis, the company has been dogged by allegations of highly unethical business practices that come at the expense of investors. According to the New York Times, eight federal agencies have been investigating the bank in 2013 alone, including the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission, and the Securities and Exchange Commission.
JP Morgan has been simultaneously lauded and lionized for escaping the investigations with relatively paltry fines and a string of profitable quarters, but a trading loss of $6.2 billion in April 2012, courtesy of the bank’s London branch, showed the first signs that JP Morgan had serious underlying issues.
The loss was singled out by CEO Jamie Dimon as being a result of trades that were “flawed, complex, poorly reviewed, poorly executed, and poorly monitored." The bank has become so large and autonomous that overly risky, complex, and possibly illegal trading methods often fly past upper management, to the point where Dimon wasn’t even aware of what had happened until the company realized such magnanimous losses.
The massive trading losses spurred the passage of the Dodd-Frank Wall Street Reform Protection Act, which has sought to curb impropriety by banks that end up damaging not just investors, but as is the case with the most recent allegations, small businesses and utility customers.
Concerning the current scandal involving unethical trading practices, JPMorgan spokesman Brian Marchiony simply said, “We’re pleased to have this matter behind us.” While that scandal is already written off, the matter of paying off the rest of their regulatory fines is far from over. Dimon has said JP Morgan is likely to shell out over half a billion in settlements in 2013 alone.
This is a drop in the bucket for a $210 billion market cap company, one that still posts record profits. But the bank, infamous for stonewalling regulators, appears to have lost a major battle in the war.
JP Morgan's stock is down .40 percent to hit $55.46 a share. They're up 24.30 percent on the year.
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