J.P. Morgan Chase
could face another $175 million in fines to put the taint of its banking deals with
The nation's second-largest bank is on the verge of reaching dual settlements with the New York District Attorney's Office and the
Securities and Exchange Commission
, according to a story in
The Wall Street Journal
. Both government agencies have been investigating a series of prepaid energy trades that J.P. Morgan arranged for Enron.
The prepaid deals, which Enron used to inflate its revenue, have haunted J.P. Morgan for more than a year. The deals, which critics have characterized as disguised loans, have been the subject of a heated congressional hearing and a $1 billion legal dispute with a group of insurers. In several recent corporate filings, J.P. Morgan said it was working to resolve the investigations, but it never put a price tag on a possible settlement.
The bank, under the purported deals, would pay a $25 million fine to New York prosecutors and between $100 million and $150 million to the SEC, according to the
Bank officials declined to comment on the possible settlements. But sources said they could be discussed when the bank's board meets Tuesday.
J.P. Morgan's board routinely meets the day before the bank releases earnings. The bank is slated to announce its second-quarter earnings early Wednesday morning.
An official with the SEC declined to comment. The SEC, as part of its Enron investigation, has been looking into allegations that some Wall Street banks aided and abetted Enron in its scheme to inflate earnings.
The SEC is close to reaching a deal with
to settle an investigation involving similar prepaid energy trades. Earlier this year,
paid an $80 million fine to settle an SEC investigation into the firm's part in Enron's shady financial transactions.
But the settlements with government regulators won't shut the door totally on the banks' dealings with Enron.
J.P. Morgan, Citigroup, Merrill and several other Wall Street banks remain defendants in a class-action lawsuit brought by Enron's shareholders. The federal judge overseeing the shareholder suit has ordered the banks and the shareholders to try to mediate an end to the dispute.