By Joel Schectman
WASHINGTON JPMorgan Chase & Co (JPM.N) has agreed to pay U.S. authorities $264 million to resolve allegations that it hired the relatives of Chinese officials in order to win banking deals, the U.S. Securities and Exchange Commission and the Justice Department said in statements Thursday. In a multi-year investigation, the SEC and Justice Department had been probing whether JPMorgan’s hires constituted bribes in violation of the U.S. Foreign Corrupt Practices Act. The SEC will receive $130 million of the settlement, with $72 million going to Justice and $61.9 million to the Fed, which penalized the bank "for unsafe and unsound practices."JPMorgan did not admit or deny the charges. As part of its settlement with the Justice Department, a Hong Kong unit of the bank admitted to making quid pro quo hiring agreements with Chinese officials to win investment business.
JPMorgan is the first major bank to settle a case over the hiring of "princelings," as the offspring and other relatives of top Chinese officials are popularly known. In recent years, several other banks including HSBC (HSBA.L) and Goldman Sachs [GSGSC.UL] have said their hiring practices in Asia are under scrutiny from U.S. authorities. The U.S. Foreign Corrupt Practices Act makes it a crime to bribe overseas officials to win business, even if the payments are non-monetary.
A JPMorgan spokesman said in an email: “the conduct was unacceptable.” The hiring programme was halted in 2013 and the bank took actions against those responsible, the spokesman said. Authorities said JPMorgan’s Asia unit created an elaborate programme called “Sons and Daughters,” that allowed clients and influential government officials to recommend potential hires. Those candidates received preferential treatment, bypassing JPMorgan’s normal recruitment programme, the SEC said.
Between 2006 and 2013, JPMorgan hired around 200 interns and full-term employees at the request of its Asia clients and Chinese officials from state-owned companies. Those state-owned companies brought JPMorgan more than $100 million in revenue, the SEC said.For example, in pushing for one job candidate a JPMorgan banker said, “It will strengthen our relationship” with a client and solidify “our position as an advisor to him and the IPOs of his companies (expected to be >$500mm in offering size,” according to SEC’s order. (Reporting by Joel Schectman; Editing by Bernadette Baum and Nick Zieminski)
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Updated Date: Nov 18, 2016 00:45 AM