Earlier in August, it came to light that one of the many investigations regulators had launched into JPMorgan Chase (NYSE:JPM) involved its hiring practices in China as they relate to the Foreign Corrupt Practices Act. A source familiar with the situation told Reuters that U.S. officials were investigating whether JPMorgan’s hiring of or business dealings with the children of well-connected people in China violated the FCPA.
While there is no law preventing companies from hiring well-connected executives or practicing nepotism, hiring their children with the explicit goal of using the act to land new business — mostly underwriting contracts, in this case — could be considered as bribery.
At the time, the investigation looked like it would focus primarily on JPMorgan’s relationship with two particular families. Deals secured with the state-owned financial conglomerate China Everbright group reportedly increased significantly after JPMorgan hired the son of Tang Shuangning, who is Chair of the conglomerate. The firm also hired Zhang Xixi, the daughter of a former railway official who oversaw a company that builds railways for the Chinese government that JPMorgan advised. There have been no accusations of wrongdoing yet, but officials have submitted requests for additional information related to the hirings.
The company’s last 10-Q filing states that one of the regulatory inquiries it is dealing with includes, “A request from the SEC Division of Enforcement seeking 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.”
Sources told Bloomberg in August that the SEC and the DoJ are investigating if JPMorgan hired the children of well-connected people in China in order to land new wealth-management business or new underwriting contracts. Perhaps as a result of the increased regulatory pressure, JPMorgan is reportedly putting a hold on engaging in new business with foreign financial institutions. The Wall Street Journal reported in August that JPMorgan company memos indicate the bank has no plans to initiate new relationships with foreign banks, nor will it entertain offers from them to add to the company’s international portfolio.
At the same time, the memo aims to reassure employees — and investors, if leaked — that the banking giant had no plans to end any of its profitable enterprises overseas. Instead, it will focus on a thorough evaluation of the business it already has. The New York Times recently published an in-depth report on the issue, and found that JPMorgan employed Wen Ruchun, the only daughter of then Prime Minister Wen Jiabao, for two years as a highly paid consultant. The Times connects JPMorgan’s business dealings with various companies that had dealings with the Wen family, but stops short of raising any allegations.
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