JPMorgan is considering paying a record $500 million settlement over allegations that California and other states paid its power plants to not produce electricity, the Wall Street Journal reports. The alleged scheme is simple: The states promise to give energy providers "make whole" payments whenever they lose money firing up their plants. So JPMorgan would allegedly post low day-ahead prices to trick states into telling them to turn their plants on, but then come back the next day with drastically higher prices. When states balked, the bank would pocket a profit on the make whole payment.
Initially, regulators had wanted a $1 billion fine, but that number has fallen in settlement negotiations. The $500 million would still represent a record for the Federal Energy Regulatory Commission, though the New York Times points out that it would mean little to JPMorgan, which last week announced a $6.5 billion quarterly profit. Still the settlement is being hotly debated within the bank. Commodities chief Blythe Masters believes the bank did nothing wrong, but others want to strike a deal quickly. Masters herself could (but, sources say, probably won't) face individual charges as well. (More JPMorgan Chase stories.)
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