To settle civil and criminal charges alleging violations of the Foreign Corrupt Practices Act, JPMorgan Chase (JPM) will pay more than $264M: $130M to the U.S. Securities and Exchange Commission, $72M to the U.S. Department of Justice, and $61.9M to the Federal Reserve Board of Governors. The settlements come following a probe that went on for several years into the bank’s hiring practices in Asia.
As part of the agreement, JPMorgan Securities (Asia Pacific) Limited (JPMorgan APAC) admitted that it established the “Sons and Daughters” referral program in 2006 to give preference to job candidates with ties to upcoming client deals. According to authorities, the bank hired 100 interns and full-time employees because foreign officials referred them. Some of these referrals were relatives of these officials. In order to be hired, a candidate had to have direct ties with a “business opportunity.” The Justice Department has called the program “bribery.”
The DOJ’s release reports that among the admissions made related to the resolution was that in 2009, a Chinese government official told a senior JPMorgan APAC banker that if a certain referred candidate were hired this would “significantly influence” the role the bank would have in an upcoming IPO for a company owned by the Chinese state. The banker notified senior colleagues, who spent several months attempting to bring the candidate into an investment banking position in New York. Even though this referred candidate did not have the qualifications for the job, senior JPMorgan APAC bankers created a position for this individual, and the bank was granted a lead role in the initial public offering. JPMorgan APAC also admitted that referred candidates were given the same salary and titles as entry-level investment bankers even though their tasks were “ancillary,” such as proofreading.