Federal officials are investigating JPMorgan Chase (JPM) to examine if the bank has been hiring the children of Chinese officials in order to gain favor when competing for contracts.
The New York Times reports that it is a civil investigation by the Securities and Exchange Commission’s antibribery unit.
Federal investigators are only looking at the bank’s hiring practices and how the deals helped the bank financially, and have yet to accuse the company of anything illegal.
From the Times:
In one instance, the bank hired the son of a former Chinese banking regulator who is now the chairman of the China Everbright Group, a state-controlled financial conglomerate…. After the chairman’s son came on board, JPMorgan secured multiple coveted assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, records show.
The Hong Kong office of JPMorgan also hired the daughter of a Chinese railway official. That official was later detained on accusations of doling out government contracts in exchange for cash bribes, the government document and public records show.
A spokesman for JPMorgan told the Times that “We publicly disclosed this matter in our 10-Q filing last week, and are fully cooperating with regulators.”
Though potentially difficult to enforce in the case of hiring, the 1977 Foreign Corrupt Practices Act prohibits companies in the U.S. from giving “anything of value” to a foreign official to gain the upper hand in business negotiations.
JPMorgan has of late been having some PR challenges. The company’s former high-up executives just recently dodged charges in the “London Whale” trading scandal that cost the bank billions, though its traders face criminal charges.