NEW YORK — JPMorgan Chase hired hundreds of friends and relatives of potential clients in order to win business in China, an international bribery scheme, federal officials said Thursday, that netted the Wall Street bank more than $100 million.
JPMorgan agreed to $264 million in fines to settle civil and criminal charges, an amount discounted in return for the bank’s cooperation with the investigations. The bank, which was accused of violating the Foreign Corrupt Practices Act, acknowledged wrongdoing as part of the settlement, an usual admission in such cases.
Facing a competitive business environment, JPMorgan hired candidates — who were often unqualified — for internships and full-time jobs at the prestigious bank, the largest in the U.S. by assets. In some cases, the applicants were referred by Chinese government officials and the employment would be extended if the relationship generated enough revenue, according to court documents.
The settlement follows a multi-year, high-profile investigation into what law enforcement officials expect to be several cases examining the conduct of U.S. banks operating in China and other parts of Asia. The JPMorgan case shows that this may “be an industry wide problem,” said Andrew Ceresney, director of enforcement at the Securities and Exchange Commission. “We do not expect this to be the last action related to this sweep.”
JPMorgan said it has made improvements to its hiring practices and was pleased that its cooperation was recognized by law enforcement officials. “The conduct was unacceptable. We stopped the hiring program in 2013 and took action against the individuals involved,” JPMorgan said in a statement.
The case centers on hiring practices in JPMorgan’s Hong Kong business. Between 2006 and 2013, the bank developed a referral program, known as “Sons and Daughters,” for applicants connected to business or government officials that could land JPMorgan work. Those applicants were allowed to bypass the usual hiring process and did not have to compete against more qualified candidates based on merit, according to court documents.
“The so-called Sons and Daughters program was nothing more than bribery by another name,” said Leslie Caldwell, assistant attorney general for the criminal division at the Justice Department. The conduct was “corruption, plain and simple.”
The arrangement was so explicit that JPMorgan employees created a spreadsheet to track the revenue brought in from clients that made referrals. If the relationship generated sufficient revenue, those hired through the referral program were offered longer-term jobs, according to court documents. Others were given shorter-term employment unless the business contact offered additional work to JPMorgan.
About 200 interns and full-time employees were hired as part of the scheme, including nearly 100 referred by Chinese government officials.
Bank employees knew that they were potentially violating the law, but persisted in the conduct for more than six years, said Ceresney of the SEC. The bank was involved in a “systematic bribery scheme,” he said.
The SEC will receive $130 million as part the settlement, the largest portion of JPMorgan’s $264 million in fines. The bank will pay the Justice Department $72 million and the Federal Reserve $62 million.