Jp Morgan Hiring Chinese Princelings Becomes a Royal Pain

JP MORGAN HIRING CHINESE PRINCELINGS BECOMES A ROYAL PAIN

Zhang Chi 2015GB

Since JP Morgan was investigated by the SEC and DOJ in August 2013, the storm of investigation on Asia hiring practices has been spread to a lot of international bank giants. It is reported that, SEC sent letters to five banks asking for details about their hiring practices in Asia. The banks were Credit Suisse, Goldman Sachs, Morgan Stanley, Citigroup and UBS. HSBC is the newest one who received requests from SEC in February 2016 to investigate its hiring practices in Asia.

After two months of investigation, JP Morgan was willing to pay up to USD 3 billion to settle a number of US investigations, including the FCPA probe of its hiring practices. It is said that the settlement talks covered a half dozen pending civil and criminal investigations. However, till now, there is no final result of such settlement between JP Morgan and SEC and DOJ. DOJ clearly wants JP Morgan to pay “billions more” than $3 billion.

According to most recent authoritative opinion, hiring princelings of foreign officials may not be identified as “anything of value to obtain or retain business” unless the official’s duties relate to the hiring company’s interests, and something of value passes through the relative to the official. Nevertheless, JP Morgan’s internal spreadsheet which contains the detail connection between its business and hiring will cause it an enormous bill. The investigation not only reveals to the world the unique Guanxi influence in Asia, but also exposes the internal control crisis of JP Morgan.

Throughout the history of all precedents of FCPA, especially ones in which the company got a good deal for its settlement, the best and effective way for JP Morgan to show its cooperation to SEC and DOJ is setting up an effective compliance program as soon as possible. While proactive compliance programs reduce the chances of violations, no one can guarantee that a violation will never happen. So an "effective compliance program" might be a company's last and best defense. Armed with an effective compliance program could even reduce the potential penalties against the company by up to 95%, according to the U.S. Sentencing Guidelines. Generally, there may have a lot of elements for a comprehensive compliance program, which may cover corporate policies, a reporting system, disciplinary procedures and pre-retention due diligence.