
JP Morgan, Citigroup pay $255 million in Enron, Dynegy settlement
"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
HKMA launches consultation on green taxonomy
Regulator could use proposal to assess progress of banks towards climate goals
After SVB downfall, EBA stress test seeks out unrealised losses
European regulator asks for data on the fair value and sensitivity of bonds and their hedges
EU banks fear Brexit battle over FRTB internal models
Bank of England approach looks easier, but that may not make much difference to model uptake
Europe’s new IRRBB test: the riddle with no answer
A proposed compromise on net interest income test is not scientific, but exact calibration may be impossible
Eurex clearing chief calls for active account carve-outs
Isda AGM: Müller says EU clearing thresholds should exempt market-making and US client trades
The regulator that troubleshoots first, asks questions later
Canada’s bank watchdog aims to intervene early to tackle burgeoning risks, even at the expense of “perfect” regulatory decisions
Banks dispute EBA’s new threshold for IRRBB test
Banks say new proposal for identifying outliers on net interest income is still too severe
Investor wish-list offers no quick fix for Swiss CoCos
Some want bond doc overhaul to clarify bail-in risk, but sovereigns can always change the rules