Courtesy of Pam Martens.
Yesterday, mainstream media was busy framing the news that JPMorgan is now under an eighth investigation by the U.S. Justice Department, this time a criminal probe into whether some of its employees obstructed the investigation by the Federal Energy Regulatory Commission (FERC) into the company’s manipulative trading of electricity in California and the Midwest.
This is a highly unusual development for a number of reasons. FERC settled its claims against JPMorgan Ventures Energy Corporation for $410 million on July 30 of this year. That amount included a civil penalty of $285 million to the U.S. Treasury and a disgorgement of $125 million to be returned to ratepayers. Typically, when a company pays a settlement of that size, its lawyers have made sure there are no loose ends – especially not a criminal probe waiting in the wings. Once the money is paid out, the bank has lost its biggest negotiating chip.
But this was no ordinary settlement. The details were so sketchy about exactly how JPMorgan had rigged its electricity trading that Senators Elizabeth Warren and Ed Markey sent a letter to FERC the day after the settlement was announced requesting a copy of FERC’s enforcement staff report on the details of the manipulations. The two Senators also wanted to know why action wasn’t taken against the JPMorgan employees who planned and carried out the illegal manipulations.
The U.S. taxpayer has actually been footing the bill on this investigation since 2011. The delay, in no small part, results from stonewalling on the part of JPMorgan and at least one outside law firm, Sutherland Asbill & Brennan LLP. JPMorgan’s counsel took the position that the California Independent System Operator Corporation (CAISO) had no authority to conduct an investigation, despite FERC assigning it the authority to do so and emailing Catherine Krupka, an attorney at Sutherland, twice in June and July of 2011 confirming it had authorized the investigation.
Only when FERC’s Office of Enforcement made a formal filing against this stonewalling and reproduced the texts of the emails did a quick about-face come from outside counsel, along with an apology saying the attorneys had forgotten about the emails.
On November 14, 2012, FERC announced it was imposing a 6-month suspension of JPMorgan’s right “to sell electric energy, capacity, and ancillary services at market-based rates.” It explained its action as follows:
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