This time JP Morgan’s strategy to acquire new businesses has crossed a legal line. The Securities and Exchange Commission and the Justice Department, after having started an investigation in 2013, announced a settlement of roughly $264 million with the bank and its Hong Kong subsidiary, accusing them of a vast foreign bribery scheme that has caused violations to the Foreign Corrupt Practices Act.
More precisely JP Morgan’s scheme involved hiring unqualified candidates for prestigious investment banking jobs solely because of their connections with possible new business opportunities, due to familiar bonds. The bank argued that the hiring of well-connected employees was routine in China, and that its own hires fell into a gray area of foreign bribery laws. However the prosecutors and regulators say that as JP Morgan hired more and more candidates based on recommendations from Chinese leaders, senior bankers in several cases explicitly tied those jobs or internships to securing deals with Chinese government-run companies. To be hired, a referred candidate had to have, in the bank’s own words, a “directly attributable linkage to business opportunity,”. This scheme enabled the company to win or retain business resulting in more than $100 million in revenue.
Together with JP Morgan, regulators believe that other banks could be involved. Between them we can find HSBC, Goldman Sachs and Deutsche Bank, allusions to their involvement have been made in investigations into their hiring practices in China started in 2013.
Returning to JP Morgan, the bank competed with other big global competitors to secure lucrative assignments in China. After a certain period of time, some JP Morgan bankers understood that they needed to prioritize their hiring to better compete with their rivals. “We lost a deal to DB today because they got chairman’s daughter work for them this summer,” one JP Morgan investment banking executive remarked to colleagues, using the initials for Deutsche Bank. As a consequence JP Morgan developed an hiring scheme, known within the bank as the Sons and Daughters program. Initially, the program was made in order not to violate the Foreign Corrupt Practices Act, but as the bank faced increased competition, senior JP Morgan bankers “institutionalized” the hiring. They explicitly tied those jobs or internships in order to assure deals with Chinese government-run companies, using them as “a tool to influence senior officials.” “The so-called Sons and Daughters program was nothing more than bribery by another name,” Leslie R. Caldwell, the head of the Justice Department’s criminal division, said in a statement. Over a seven-year period, JP Morgan hired about 200 interns and full-time employees. Around half of these candidates were referred by government officials at Chinese state-owned companies and government agencies. JP Morgan’s executives in Asia then used their connections with these government agencies to help the company and clients face complex regulatory landscapes.
Mattia Degiovanni
More precisely JP Morgan’s scheme involved hiring unqualified candidates for prestigious investment banking jobs solely because of their connections with possible new business opportunities, due to familiar bonds. The bank argued that the hiring of well-connected employees was routine in China, and that its own hires fell into a gray area of foreign bribery laws. However the prosecutors and regulators say that as JP Morgan hired more and more candidates based on recommendations from Chinese leaders, senior bankers in several cases explicitly tied those jobs or internships to securing deals with Chinese government-run companies. To be hired, a referred candidate had to have, in the bank’s own words, a “directly attributable linkage to business opportunity,”. This scheme enabled the company to win or retain business resulting in more than $100 million in revenue.
Together with JP Morgan, regulators believe that other banks could be involved. Between them we can find HSBC, Goldman Sachs and Deutsche Bank, allusions to their involvement have been made in investigations into their hiring practices in China started in 2013.
Returning to JP Morgan, the bank competed with other big global competitors to secure lucrative assignments in China. After a certain period of time, some JP Morgan bankers understood that they needed to prioritize their hiring to better compete with their rivals. “We lost a deal to DB today because they got chairman’s daughter work for them this summer,” one JP Morgan investment banking executive remarked to colleagues, using the initials for Deutsche Bank. As a consequence JP Morgan developed an hiring scheme, known within the bank as the Sons and Daughters program. Initially, the program was made in order not to violate the Foreign Corrupt Practices Act, but as the bank faced increased competition, senior JP Morgan bankers “institutionalized” the hiring. They explicitly tied those jobs or internships in order to assure deals with Chinese government-run companies, using them as “a tool to influence senior officials.” “The so-called Sons and Daughters program was nothing more than bribery by another name,” Leslie R. Caldwell, the head of the Justice Department’s criminal division, said in a statement. Over a seven-year period, JP Morgan hired about 200 interns and full-time employees. Around half of these candidates were referred by government officials at Chinese state-owned companies and government agencies. JP Morgan’s executives in Asia then used their connections with these government agencies to help the company and clients face complex regulatory landscapes.
Mattia Degiovanni