NEW YORK (TheStreet) -- JPMorgan Chase (JPM) said in a regulatory filing Wednesday that it received a "Wells-type" notice in March that the Federal Energy Regulatory Commission intends to bring a possible enforcement action against the bank related to its bidding practices in the organized power markets.
A Wells notice is a notification from a regulator that it intends to bring an enforcement action against a company and gives the recipient of the notice a chance to argue why such an action is unnecessary.
The New York Times reported last week about the possible enforcement action based on a 70-page document sent to the bank. The document accused the bank of engaging in "manipulative schemes" that transformed "money-losing power plants into powerful profit centers," and that one of its most senior executives, Blythe Masters, gave "false and misleading statements" under oath.
According to the complaint, traders offered energy at prices "calculated to falsely appear attractive" prompting authorities in California and Michigan to pay $83 million in excessive payments.JPMorgan spokeswoman Kristin Lemkau told the Times that the bank intended to "vigorously defend the firm and the employees in this matter" and that it strongly disputed that Blythe Masters or any of its employees lied under oath. JPMorgan CEO Jamie Dimon warned in his annual letter to shareholders earlier this year that the bank expects to see more regulatory enforcement actions. The bank is facing other regulatory investigations pertaining to its credit card business and its alleged failure to report suspicious transactions related to Ponzi-scheme operator Bernie Madoff. Analysts continue to regard JPMorgan as a top stock pick, arguing that the bank's profits and healthy balance sheet offset legal concerns. Still, the recent clashes with regulators has given more ammunition to critics of the bank's lapses in risk management and controls and has stepped up the pressure on Dimon. In recent days, two influential shareholder proxy advisory firms have said that shareholders should vote in favor of a proposal to separate the Chairman and CEO roles at the bank, a blow to Dimon who has held both roles since 2006. They also argue for the removal of several directors. -- Written by Shanthi Bharatwaj in New York. >Contact by Email. Follow @shavenk
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