Jake's View
PUBLISHED : Tuesday, 10 December, 2013, 1:39am
UPDATED : Tuesday, 10 December, 2013, 1:40am

JP Morgan just doing as Romans do

Examination of investment firm for possible bribery just another example of US regulators' unctuous morality and smells of hypocrisy


Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.

US authorities are examining whether JP Morgan violated anti-bribery laws by hiring the children and other relatives of well-connected politicians and clients in China in exchange for having business steered to the firm.

Bloomberg, SCMP 
December 9

You wonder sometimes at the naivety of people who think their company e-mails are private just because it says so in the disclaimer attached to those e-mails. Memo to JP Morgan: Unplug the company e-mail system.

In the research department of a big local brokerage firm I worked at 30 years ago we had a good way of dealing with the children of the well-connected, whom the chairman regularly referred to us for jobs. He didn't want them on the dealing desk but knew they were harmless in research.

Our research director, Frank I shall call him, would greet the new hires with great warmth, telling them what a wonderful career choice they had made and how bright a future lay ahead of them.

He would then say: "Now, look, before we really get started, perhaps it would be a good idea if you read yourself in a little, so to speak, by familiarising yourself with some of the investment opportunities we are considering at present."

He would then walk to the file library (this was pre-digital age) and say: "T to V this time, Shirley." Shirley would then give him a 60cm stack of the clippings files of companies with names beginning with the letters T to V.

The connected kids often more than pay their way by steering their employers through Beijing

Within three days the candidate would be taking longer lunch breaks. Most were gone after a week. Those few who lasted two weeks were given real work.

Frank's other big first-day test for the sons of the well-connected was to say: "Come and join us for a beer after work." Frank favoured the bottoms-up school of drinking and if the fellow was still standing and could make sense after two hours, he kept the job.

I also put in a spell with the big investment banks and saw easily as much of this well-connected hiring with the difference that for the investment banks it was truly worthwhile.

The thing to understand about these big lords of the investment business is that there is not much to distinguish between them when they are pitching a company that wants a listing on the stock market and now must have a leading sponsor for that new issue.

They all promise the company they can get the highest price of any of the sponsors under consideration but none will guarantee that price. They only do this after the issue has already been sold. They didn't get to be big by being foolish.

Instead they bring along a troupe of clever-looking people who can look the company's executives straight in the eye and baldly lie that "the analytics" show their own bank at the top every time.

When this claim is questioned, out come enough briefing books to make the conference table groan under the weight, each of them introduced with jargon unintelligible to the company's people. If the claim to superior pricing ability is not then refuted, it may just stand.

But obviously this is still a thin reed to lean on. Far better to get the sponsorship with sparkling investment bank jobs for the children of the company's executives. That really works. Better yet if these executives are politically connected. More sponsorships may then come the easy way.

And why not? When in Rome do as the Romans do. This is the way deals are done in a deeply corrupt system. If, rather than send in armed drones as they have in Iraq, Afghanistan and Pakistan, US authorities are happy to give it all implicit acceptance by full recognition of Beijing, why should US banks not do the same?

Leave aside that what happens within China is really not Washington's business, this form of nepotism does no harm to the public and the connected kids often more than pay their way by steering their employers through the dangerous shoals of policy confusion in Beijing.

I have no time for the unctuous morality of American securities regulators. I think it is mostly self-serving in helping them build their empires or political careers and it smells of rank hypocrisy.


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