“A standard part of enforcement actions against companies these days is the multimillion-dollar – or even multibillion-dollar – penalty. What can be perplexing is figuring out how those penalties were determined, and whether they have much if any direct relationship to either the gains realized from the violations or the harm inflicted.

“Recent settlements by JPMorgan Chase are good examples of the significant payments required as part of the atonement for misdeeds. The bank paid a $200 million civil penalty to the Securities and Exchange Commission for violations related to its internal controls in the so-called London whale trading loss, and $2 billion to the Justice Department as part of the broad settlement over sales of mortgage securities.

“How did the cases result in such nice round penalty figures? The answer appears to be only vaguely connected to the statutes authorizing civil penalties for the violations involved.”

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