According to The Wall Street Journal, U.S. prosecutors and regulators are probing the Asian hiring practices of J.P. Morgan (JPM) and a number of other banks. The probe focuses on the Foreign Corrupt Practices Act, which is a U.S. law that prohibits giving anything of value to foreign government officials in order to gain a business edge.
Hiring employees in order to garner something in return is one area of scrutiny. The WSJ cited the hiring of the son of Chinese commerce minister Gao Hucheng even though he didn’t do well on job interviews, accidentally sent a sexually explicit email to a human resources employee, and exhibited other traits that purportedly made him a liability. Yet, during job cuts, the bank didn’t let him go and would have given him another position. Hucheng reportedly said that he would “go extra miles” for J.P. Morgan if his son wasn’t laid off.
Although China’s commerce ministry isn’t a client of the firm it has influence over business and is entitled to rule on mergers among multinationals that engage in business in that country. However, both father and son have not been accused of wrongdoing.
Sources told the WSJ that the financial firm is expected to settle with both the Securities and Exchange Commission and the Department of Justice over allegations related to the U.S.’s antibribery law. A fine and a mandated overhaul of hiring practices would be likely.
Meantime, the Chinese affiliates of PricewaterhouseCoopers, KPMG, Deloite Touch Tohmatsu, and Ernst & Young have each agreed to pay $500,000 to settle with the SEC because of their reluctance to hand over documents about Chinese companies that the regulator is investigating. The deal gives the firms an opportunity to avoid temporary suspension of their right to audit firms that are U.S.-traded. All four consented to abide by procedures that would make sure that the Commission could get audited documents from them in the future.
It was last year that a judge ruled that the accounting firms violated federal law when they wouldn’t give the audit-work papers regarding certain Chinese clients to the agency. The companies contended that although the clients’ securities traded in this country the accounting firms were barred from sharing the documents because of Chinese laws that treated these papers as if they were state secrets.
The work papers were eventually handed over to the Commission through regulators in China. The SEC believes it is important than they be given access to audit documents to protect investors from fraud. Already the SEC has filed over two-dozen enforcement cases against Chinese firms and their executives.
As pat of the settlement, the accounting firms must follow specific procedures that will allow them to hand over the audit documents to the SEC through the China Securities Regulatory Commission. However, they are not denying or admitting to wrongdoing.
J.P. Morgan Emails Illuminate Hiring of China Official’s Son, The Wall Street Journal, February 6, 2015
More Blog Posts:
SEC Sanctions UBS, Charles Swab, Oppenheimer, & 10 Other Firms For Improper Sales of Puerto Rico Junk Bonds, Stockbroker Fraud Blog, November 3, 2015
JPMorgan Suspends Forex Trader for Alleged Disclosures Involving Royal Bank of Scotland-Related Activities, Institutional Investor Securities Blog, January 14, 2015
U.S. Department of Labor’s Fiduciary Rule for Retirement Advisers Hits Another Snag, Stockbroker Fraud Blog, February 6, 2015