Morgan Stanley will pay $4.8 million and admit no wrongdoing as part of a settlement with the federal government over allegations that it helped KeySpan, an electricity generating company, fix prices against New York consumers. A federal judge “begrudgingly” approved the deal Tuesday, overruling claims from consumer advocacy groups that the government was letting Morgan Stanley off the hook too easily.
The $4.8 million settlement pales in comparison to the $300 million the price fixing reportedly cost New York consumers, and it even falls far short of the $21.6 million in revenue the deal generated for Morgan Stanley, Reuters reported:
The government said the arrangement allowed KeySpan to withhold substantial electricity generating capacity from the market, driving prices higher for consumers, and generated $21.6 million of net revenue for Morgan Stanley.
New York state officials and the AARP both opposed the settlement on grounds that it was too small, and U.S. District Judge William Pauley seemingly agreed. But he approved the settlement anyway, saying that “despite this court’s misgivings, the government’s decision to settle for less than full damages is entitled to judicial deference.” AARP wanted Morgan Stanley to relinquish the $21.6 million in revenue and also wanted the $4.8 million redistributed to consumers. Pauley rejected that claim; the money will instead go to a U.S. Treasury fund to serve the public interest.
Morgan Stanley isn’t the only bank to get off easily. Multiple Wall Street banks have reached settlements that amount to a pittance compared to their profits, and as Pauley noted, these slaps on the wrist carry the substantial risk that a “large financial services firm like Morgan Stanley could view such a modest penalty as merely a cost of doing business.”