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May 3 (Reuters) - Investigators from the U.S. agency thatregulates power markets have found a unit of JPMorgan Chase & Co manipulated trading in the California and Michiganelectricity markets, the New York Times reported, in what wouldbe the latest government crackdown on trading abuses in themarkets.
The newspaper said it reviewed a confidential, 70-pagegovernment document that was sent to JPMorgan in March and thatalso criticized Blythe Masters, the bank's current head ofglobal commodities and former chief financial officer.
JPMorgan denied their employees did anything wrong relatedto the California and Michigan electricity trading.
The Times, citing the document, said investigators from theFederal Energy Regulatory Commission (FERC) found JPMorgandevised "manipulative schemes" that transformed "money-losingpower plants into powerful profit centers."
The document came after a months-long inquiry into thebank's trading in power markets, one of several high-profileFERC investigations since its enforcement powers were expandedfollowing the Enron scandal a decade ago.
In October, it proposed a record $470 million penalty onBarclays PLC for trading activity in California.
The document also found Masters "falsely" denied under oathwhether she was aware of schemes carried out by a group ofenergy traders in Houston, but did not elaborate, according toThe Times.
"We strongly dispute that Blythe Masters or any employeelied or acted inappropriately in this matter. We intend tovigorously 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 torespond to the allegations.
The document appeared to be the strongest sign yet that FERCstaff is set to push ahead with a formal action on the tradingactivity, which the Times said took place in 2010 and 2011.
In November, FERC imposed a temporary ban on JPMorgan'sphysical power trading for failing to disclose information tothe FERC and the California ISO, the operator of the state'spower 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 Novembervote, saying the agency should include penalties for any failureto disclose information as part of the market manipulation caseif the agency decided to pursue that case.
FERC officials were not immediately available for comment.
BARCLAYS DENIAL
In order to pursue a penalty or disgorgement of profits,FERC staff typically issues a public show-cause order, which hasnot yet occurred in the JPMorgan case.
In October 2012, FERC issued a show-cause order to a unit ofBarclays Plc that alleged traders at the British bankmanipulated the California power market from late 2006 to 2008.
Barclays has disputed the FERC allegations and said it willdefend itself in court if FERC issues a final order seeking toimpose the fine. To date, FERC has not issued a final order.
In September 2012, FERC issued a show cause order against aunit of Deutsche Bank that alleged the German bankmanipulated the California power market from January to March2010. After first denying its traders did anything wrong,Deutsche settled the case in January for $1.7 million.
In the course of an investigation, FERC staff develops itscase, deposing witnesses, issuing interrogatories, sending outdata requests and collecting a record, according to Susan Court,a former senior lawyer at FERC now at SJC Energy Consultants LLCin Arlington, Virginia.
If the staff thinks there is wrongdoing, Court said, theyput together a memorandum that documents their case and give itto the would-be defendant for a response.
