US probes JPMorgan over China hires
THE federal authorities have opened a bribery investigation into whether JPMorgan Chase hired the children of powerful Chinese officials to help the bank win lucrative business in the booming nation, according to a confidential United States government document.
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, according to the document.
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 showed.
The Hong Kong office of JPMorgan also hired Ms Zhang Xixi, 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 former official's daughter came to JPMorgan at an opportune time: The China Railway Group, a state-controlled construction company that builds railways for the Chinese government, was in the process of selecting JPMorgan to advise on its plans to become a public company.
JPMorgan - which has had a number of run-ins lately with regulators - made an oblique reference to the inquiry in its quarterly filing this month.
The filing stated that the Securities and Exchange Commission (SEC) had sought information about JPMorgan's "employment of certain former employees in Hong Kong and its business relationships with certain clients".
In May, according to a copy of the confidential government document, the SEC's anti-bribery unit requested from JPMorgan a battery of records about Mr Tang Xiaoning.
He is the son of Mr Tang Shuangning, who since 2007 has been chairman of the China Everbright Group. Before that, the elder Mr Tang was the vice-chairman of China's top banking regulator.
Both Ms Zhang and Mr Tang have since left JPMorgan.
Legal experts note that there is nothing inherently illicit about hiring well-connected people.
"While the hire of a son or daughter itself is not illegal, red flags would be raised if the person hired was not qualified for the position, or, for example, if a firm never received business before and then, lo and behold, the hire brought in business," said Assistant Professor Michael Koehler, who is an expert on the Corrupt Practices Act, at the Southern Illinois University School of Law.