(Reuters) - Investigators from the agency that regulates power markets have found a unit of JPMorgan Chase & Co
The newspaper said it reviewed a confidential, 70-page government document that was sent to JPMorgan in March and that also criticized Blythe Masters, the bank's current head of global commodities and former chief financial officer.
JPMorgan denied their employees did anything wrong related to the California and Michigan electricity trading.
The Times, citing the document, said investigators from the Federal Energy Regulatory Commission (FERC) found JPMorgan devised "manipulative schemes" that transformed "money-losing power plants into powerful profit centers."
The document came after a months-long inquiry into the bank's trading in power markets, one of several high-profile FERC investigations since its enforcement powers were expanded following the Enron scandal a decade ago.
In October, it proposed a record $470 million penalty on Barclays PLC
The document also found Masters "falsely" denied under oath whether she was aware of schemes carried out by a group of energy traders in Houston, but did not elaborate, according to The Times.
"We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter. We intend to vigorously defend the firm and the employees in this matter," JPMorgan spokeswoman Jennifer Zuccarelli told Reuters on Friday.
The newspaper said FERC gave JPMorgan until mid-May to respond to the allegations.
The document appeared to be the strongest sign yet that FERC staff is set to push ahead with a formal action on the trading activity, which the Times said took place in 2010 and 2011.
In November, FERC imposed a temporary ban on JPMorgan's physical power trading for failing to disclose information to the FERC and the California ISO, the operator of the state's power grid, in a market manipulation investigation.
The ban prevented the bank from trading power at market- based rates for six months starting April 1.
FERC Commissioner Cheryl LaFleur dissented in that November vote, saying the agency should include penalties for any failure to disclose information as part of the market manipulation case if the agency decided to pursue that case.
FERC officials were not immediately available for comment.
In order to pursue a penalty or disgorgement of profits, FERC staff typically issues a public show-cause order, which has not yet occurred in the JPMorgan case.
In October 2012, FERC issued a show-cause order to a unit of Barclays Plc
Barclays has disputed the FERC allegations and said it will defend itself in court if FERC issues a final order seeking to impose the fine. To date, FERC has not issued a final order.
In September 2012, FERC issued a show cause order against a unit of Deutsche Bank
In the course of an investigation, FERC staff develops its case, deposing witnesses, issuing interrogatories, sending out data requests and collecting a record, according to Susan Court, a former senior lawyer at FERC now at SJC Energy Consultants LLC in Arlington, Virginia.
If the staff thinks there is wrongdoing, Court said, they put together a memorandum that documents their case and give it to the would-be defendant for a response.
(Reporting by David Sheppard in London and Scott DiSavino and David Henry in New York; Editing by Nick Zieminski and Jeffrey Benkoe)