JP Morgan, Citigroup pay $255 million in Enron, Dynegy settlement
The Securities and Exchange Commission (SEC) today settled enforcement proceedings brought against JP Morgan Chase and Citigroup. Both firms’ settlements pertain to Enron-related proceedings brought by the SEC. Under the agreements, JP Morgan Chase will pay $135 million. Citigroup will pay $120 million; $19 million of this settlement is related to Citigroup’s business with Dynegy.
"We intend to continue to hold counterparties responsible for helping companies manipulate their reported results. Financial institutions in particular should know better than to enter into structured transactions where the structure is determined solely by accounting and reporting wishes of a public company," said Linda Chatman Thomsen, deputy director in the SEC's enforcement division.
In its statement, the SEC claimed “each institution helped Enron mislead its investors by characterising what were essentially loan proceeds as cash from operating activities. The proceeding against Citigroup also resolves [the SEC’s] charges stemming from the assistance Citigroup provided Dynegy in manipulating that company's financial statements through similar conduct”.
The main thrust of the SEC’s allegations were that JP Morgan Chase and Citigroup engaged in, and helped design, structured finance transactions that misled investors, analysts and rating agencies as to Enron and Dynegy’s true financial health.
In relation to JP Morgan Chase’s Enron-related activities, the Federal Reserve Bank of New York and the New York State Banking Department entered into a written agreement with JP Morgan Chase, whereby the US bank undertook to enhance its risk management programs and internal controls.
JP Morgan Chase and Citigroup will also pay a total of $27.5 million to the District Attorney’s office, $2.5 million of which is to reimburse the office’s expenses. Under this agreement, the District Attorney will not prosecute either of the US firms’ officers or employees.
In reaching the settlement, both JP Morgan Chase and Citigroup neither admitted, nor denied, the SEC’s allegations. William Harrison, JP Morgan Chase’s chairman and chief executive said his firm was “glad” to put a major portion of the “Enron matter” behind it.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Top 10 op risks: third parties stoke cyber risk
- Japanese megabanks shun internal models as FRTB bites