JPMorgan Bribery Probe Said to Expand as Spreadsheet Found

Dawn Kopecki
Bloomberg
August 29, 2013
A probe of JPMorgan Chase & Co.’s hiring practices in China has uncovered red flags across Asia, including an internal spreadsheet that linked appointments to specific deals pursued by the bank, people with knowledge of the matter said.
The Justice Department has joined the Securities and Exchange Commission in examining whether JPMorgan hired people so that their family members in government and elsewhere would steer business to the firm, possibly violating bribery laws, said one of the people, all of whom asked to not be named because the inquiry isn’t public. The bank has opened an internal investigation that has flagged more than 200 hires for review, said two people with knowledge of the examination, results of which JPMorgan is sharing with regulators.
The scrutiny began in Hong Kong and has now expanded to countries across Asia, looking at interns as well as full-time workers, two people said. The employees include influential politicians’ family members who worked in JPMorgan’s investment bank, as well as relatives of asset-management clients, the people said. Wall Street firms have long enlisted people whose pedigree and connections can win business, a practice that doesn’t necessarily violate the law.

‘Real Jobs’

The SEC will hunt for evidence showing “these weren’t real jobs, that they were only there because their father or mother were important public officials,” said Dan Hurson, a former U.S. prosecutor and SEC lawyer who runs his own Washington practice. “If the public official requested the job for the child, that would be a strong indication to the company that the official was seeking and receiving something of value.”
The government hasn’t accused JPMorgan or its executives of wrongdoing in connection with the hiring inquiry.
“We are fully cooperating with regulators,” Mark Kornblau, a company spokesman, said in an interview. Michael Passman, a spokesman at the Justice Department, and John Nester at the SEC declined to comment.
“This is an example of the difficulties foreign firms face in doing business in China,” David Marshall, a Singapore-based banking analyst at CreditSights Inc., wrote in an e-mailed response to questions today. “The problem for the foreign firms is that local practices may be different from — and at times in conflict with — the legal and ethical rules under which they are required to operate.”

Linking Decisions

JPMorgan, which has been in the Asia-Pacific region for about 140 years, has a presence in 16 countries in the region including Australia, Japan, South Korea, China, Singapore,Thailand, Bangladesh and India.
The spreadsheet, which links some hiring decisions to specific transactions pursued by the bank, may be viewed by regulators as evidence that JPMorgan added people in exchange for business, according to one person with knowledge of the review.
The bank has hired law firm Paul Weiss Rifkind Wharton & Garrison LLP, one of the people said. It also has enlisted King & Wood Mallesons and Herbert Smith Freehills, The Lawyer reported last week, citing unidentified people close to the matter. Paul Weiss is handling the U.S. probe, according to the publication.

U.K. Laws

The company is also examining its hiring practices in Europe and elsewhere, two of the people said. The U.S. Foreign Corrupt Practices Act bars companies from making payments or providing anything of value to government officials to win business. The U.K.’s Bribery Act enacted in 2011 imposes a broader ban on payments that entice anyone to improperly carry out their duties.
The Serious Fraud Office, which enforces U.K. laws targeting fraud, bribery and corruption, isn’t currently investigating JPMorgan’s hiring practices for signs of bribery, according to two people with knowledge of the situation.
JPMorgan, led by Chief Executive Officer Jamie Dimon, 57, is contending with criminal investigations of its energy-trading and mortgage-backed securities operations. The firm also faces U.S. probes of its anti-money-laundering safeguards, foreclosures, credit-card collections, and $6.2 billion in losses last year on botched derivatives bets by a U.K. trader known as the London Whale.

Dimon’s Push

The company has made bolstering internal controls and regulatory compliance its priority this year, Dimon told investors in April. Shannon Warren was appointed in January to lead a new companywide oversight and control group.
“We’ve taken some of our best people and we’ve given them command-and-control authority, we’ve staffed them up, and we’re going to fix every single last” problem, Dimon told investors at a June conference.
The bank made a reference to an SEC investigation of its personnel in a quarterly filing on Aug. 7, saying the regulator had asked for information about the “employment of certain former employees in Hong Kong and its business relationships with certain clients.”
The SEC requests have focused on two people in China whose parents have leadership roles at a state-controlled financial company and a railway, the New York Times reported Aug. 17, citing a U.S. government document it had reviewed.
After each appointment, the bank got assignments from firms connected to the new hires’ parents, according to the newspaper. The government document and public records don’t indicate that the employees helped JPMorgan secure the business or that the workers were unqualified, the newspaper said.