J.P. Morgan Chase has agreed to pay $264 million to settle claims that it hired the children of Chinese officials as a way of ingratiating itself with leaders of one of the world’s largest economy.
Joel Schectman of Reuters had the news:
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 and Goldman Sachs [GSGSC.UL], have said their hiring practices in Asia were under scrutiny by 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 program was halted in 2013 and the bank took actions against those responsible, the spokesman said.
Dominic Rushe of The Guardian noted that the settlement came after a three-year investigation:
The settlement with US regulators comes after a three-year investigation into a vast foreign bribery scheme that violated the Foreign Corrupt Practices Act (FCPA). It could be the first of several such deals with Wall Street banks.
“JP Morgan engaged in a systematic bribery scheme by hiring children of government officials and other favoured referrals who were typically unqualified for the positions on their own merit,” said Andrew Ceresney, director of the Securities and Exchange Commission’s (SEC) enforcement division.
“JP Morgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative.”
The Department of Justice called the scheme “bribery by any other name” and said it had recently created three dedicated international corruption squads “to combat this type of quid pro quo, and we’ll use all resources at our disposal to uncover and put an end to these crimes”.
Starting in 2006 senior Hong Kong-based JP Morgan bankers set up and used a “client referral programme”, also referred to as the “sons and daughters programme”, to hire candidates referred by clients and government officials.
Ben Protess and Alexandra Stevenson of the New York Times reported that further actions against banks may not happen under the newly elected president:
The case could lay the groundwork for the authorities to pursue penalties against other big banks as well. Banks including HSBC, Goldman Sachs and Deutsche Bank have hinted that they face investigations into their hiring practices in China as part of a larger sweep by the agency that began in 2013.
“We do not expect this to be the last action resulting from that sweep,” Andrew J. Ceresney, the head of enforcement at the Securities and Exchange Commission, told reporters on Thursday.
It is unclear what will happen to the investigation under the president-elect, Donald. J. Trump. Mr. Ceresney and other officials who led the investigation are expected to leave the government in the coming weeks.
In the investigation of JPMorgan, it was not immediately apparent whether the bank would be accused of carrying out a quid pro quo arrangement, an issue at the heart of whether JPMorgan violated United States law governing foreign bribery.
