JPMorgan Hit By Bribery Probe Over China Hiring Practices
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JPMorgan Chase is being investigated by U.S. authorities over claims that the investment bank hired children of influential Chinese officials to secure business advantages in the Mainland, the New York Times reported on Saturday.
Citing a confidential United States government document, the Times said a bribery investigation had been opened to study the allegations.
JPMorgan Chase is being investigated by U.S. authorities over claims that the investment bank hired children of influential Chinese officials to secure business advantages in the Mainland, the New York Times reported on Saturday.
Citing a confidential United States government document, the Times said a bribery investigation had been opened to study the allegations.
The paper cited a case where the bank hired the son of Tang Shuangning, a former Chinese banking regulator who is now chairman of the state-run investment firm China Everbright. After the son joined JPMorgan, the bank secured several important assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, the Times reported.
JPMorgan’s Hong Kong office also hired the daughter of a Chinese railway official as The China Railway Group chose JPMorgan to advise it on a public flotation in 2007 when it raised $5 billion. The official was later detained on accusations of taking cash bribes in exchange for handing out government contracts, the Times reported, citing the U.S. document and public records.
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The Times however said the government document did not show a clear link between JPMorgan’s hiring policy and its ability to secure business. The records also did not suggest that the hired employees were unqualified, or that they necessarily helped JPMorgan secure business.
The U.S. Securities and Exchange Commission confirmed there had been a request for “information and documents relating to, among other matters, the firm’s employment of certain former employees in Hong Kong and its business relationships with certain clients”.
U.S. law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be viewed as bribery, and the SEC is investigating JPMorgan’s actions under the U.S. Foreign Corrupt Practices Act.
JPMorgan, which is already mired in lawsuits and investigations over risky trades, has denied any wrongdoing. A company spokesman said the firm was “fully cooperating with regulators”, adding that it had publicly disclosed this matter in its 10-Q filing last week.
A senior Chinese official told the Financial Times that the Chinese government had not launched its own investigation into JPMorgan or its hiring practices in the country, but that the revelations are causing concern because the practice of hiring the children of senior officials to work at financial institutions is very common.
Goldman Sachs once hired Jiang Zhicheng, grandson of the former Chinese president Jiang Zemin, for its direct private investment arm, for instance.
The practice of hiring politically-connected bankers in China was widespread in the early to mid 2000’s, when Wall Street firms engaged in so-called ‘elephant hunting’, a term used to describe the chasing of mandates to manage the multi-billion dollar stock offerings of the country’s big state-owned enterprises.
“It’s been happening for the past 20 years,” said Ronald Wan, Chair Professor of Renmin University of China and a former banker, referring to the hiring of politically connected Chinese bankers. The key to the JPMorgan probe, he said, was whether these hirings had any special bonus attached or any actual corruption that could be traced.
Wan added that such hiring happens all across the world, though in China, relationships and personal connections continue to play a critical role in business decisions.
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