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Monday, 22 July 2013 08:50

Another Key Wall Street Master of the Universe to Elude Penalties for Alleged Fraud

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banksters7 22Goldman Sachs, JP Morgan Chase...Just Fill in the Blank. Card is Transferable to Any Wall Street Master of the Universe.No, this is not yet another commentary about a top Wall Street player escaping potential criminal charges.  Criminal charges?  Are you kidding?  Going to jail or even being criminally indicted is about as likely for a Wall Street master of the universe as Edward Snowden getting a free ride on Air Force One and joining the Obama family on a Christmas vacation trip to Disney World.

No this column is about a key Wall Street executive, Blythe Masters, who the New York Times (NYT) reports is likely to escape even US government-assessed civil damages for what is alleged fraudulent trading (to increase profit) of electricity prices in California and Michigan:

Even as the nation’s top energy regulator is poised to extract a record settlement from JPMorgan Chase over accusations that it manipulated power markets, the agency is expected to spare a top bank lieutenant who federal investigators initially contended made “false and misleading statements under oath,” according to people briefed on the matter.

Blythe Masters, a seminal Wall Street figure who is known for developing exotic financial instruments, emerged this spring at the center of an investigation by the Federal Energy Regulatory Commission [FERC] into accusations of illegal trading in the California and Michigan electricity markets.

Of course, BuzzFlash at Truthout cannot say whether or not the allegations against Ms. Masters are accurate or provable, but the NYT notes:

The regulator [FERC] found that JPMorgan designed trading “schemes” that converted “money-losing power plants into powerful profit centers,” a commission document said.

While the commission and JPMorgan are negotiating a settlement for about $500 million, the people briefed on the matter said, Ms. Masters is not expected to face a separate action....

Months earlier, investigators planned to recommend that the regulator find Ms. Masters, who holds a powerful position within JPMorgan as the head of its commodities business, “individually liable.” But as the investigation progressed, these people said, top energy regulatory officials have been leaning toward not pursuing any civil charges against Ms. Masters....

Ms. Masters formed close ties with Jamie Dimon, the bank’s chief executive, who has moved to shore up support for her, according to people close to the bank. The two were bound by their belief that the commodities business was critical to JPMorgan’s growth.

Would that be the Jamie Dimon who sloughed off the Libor scandal, is BFF of President Obama, and who receives government coordinated protection from time to time?  Yes it is. 

As for Masters, she is not just a member of the Wall Street impunity crowd that controls much of the nation's wealth (unless their gambles fail and they request taxpayer subsidies to bail them out). According to the NYT, Ms. Masters is one of the primary creators of the very exotic financial "instruments" that were a key contributor to the US economic crash of 2008:

Within Wall Street, Ms. Masters is widely considered a pioneer for her use of credit derivatives, the complex financial products that played a central role in the 2008 financial crisis. Rising through the ranks of JPMorgan — she was the youngest managing director at 28 — Ms. Masters became one of the most powerful executives on Wall Street, propelled by a vision that the products could radically remake the banking industry.

Okay, time for a recap.  JP Morgan Chase is negotiating to pay a $500 million fine for manipulation of energy markets, reportedly overseen by Masters. FERC is backing off holding the person who allegedly masterminded the scheme accountable. 

How many times have we said this? It's deja vu all over again.

No one is even discussing, as far as the NYT reveals, criminal prosecution.  As has been standard for the Obama administration, the $500 million fine would come out of the company's balance sheet, which would affect stock holders but not the executives who oversaw the scheme.

A July 18th NYT article starkly states:

Under “pressure to generate large profits,” investigators said in the March document, traders in Houston devised a solution. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities....

In the March document, the investigators elaborated on the bank’s pushback. The 70-page document said that the bank “planned and executed a systematic cover-up” of documents that exposed the trading strategy, including profit and loss statements.

The investigators also traced some of the obfuscating to Ms. Masters. After California authorities began to object to the bank’s trading strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the regulator, known as FERC, said.

The investigators also cited an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that questioned whether the bank had skirted the law. The new wording: “JPMorgan does not believe that it violated FERC’s policies.”

Again, we don't know if these charges would be proved true or not in a regulatory agency hearing or court of law, but if they are accurate, wouldn't this constitute fraud?

And why is Jamie Dimon willing, it appears, to pay a half billion dollar fine out of his company's piggy bank if the accusations are false?

Good questions, but when you have Wall Street "sovereign financial immunity," the answers don't really matter, do they?

JP Morgan Chase executives are even paying fines with someone else's money.

(Photo: DonkeyHotey)