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JPMorgan Chase is the largest bank in the United States, and one of the world’s largest public companies. 

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JPMorgan Chase's ties with Wen Jiabao's family investigated

Relationship with daughter part of bribery inquiry into whether bank swapped contracts and jobs for deals with state-owned firms

PUBLISHED : Thursday, 14 November, 2013, 11:54am
UPDATED : Friday, 15 November, 2013, 7:32am


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15 Nov 2013
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Total number of votes recorded: 361

To promote its standing in China, JPMorgan Chase turned to a seemingly obscure consulting firm run by a 32-year-old executive named Lily Chang.

Chang's firm, which received a US$75,000-a-month contract from JPMorgan, appeared to have only two employees. And on the surface, Chang lacked the influence and public name recognition needed to unlock business for the bank.

But what was known to JPMorgan executives in Hong Kong, and some executives at other major companies, was that "Lily Chang" was not her real name. It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who was premier at the time with oversight of the economy and its financial institutions.

JPMorgan's link to Wen Ruchun - which came during a time when the bank also invested in companies tied to the Wen family - has not been previously reported. Yet a review by The New York Times of confidential documents, Chinese public records and interviews with people briefed on the contract shows that the relationship pointed to a broader strategy for accumulating influence in China: put the relatives of the nation's ruling elite on the payroll.

And the Wen family's sway was not just political. After Wen Ruchun's father joined the inner circle of China's rulers as deputy prime minister in 1998, the family amassed a secret fortune through a series of partnerships and investment vehicles, a 2012 investigation by the Times found.

Now, US authorities are scrutinising JPMorgan's ties to Wen Ruchun, whose alias was government approved, as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned companies, according to the documents and interviews. The bank, which is co-operating with the inquiries and conducting its own internal review, has not been accused of any wrongdoing.

The investigation began with an examination of the bank's decision to hire the daughter of a Chinese railway official and the son of a former banking regulator who is now the chairman of a state-controlled financial conglomerate. The contract with the consulting firm of Wen Ruchun, 40, indicates that the bank's hiring practices also touched the highest rungs of political power in China. Her father was premier from 2003 until earlier this year. Her mother has served as a government official with oversight of the nation's gem and diamond industry. And since 2006, Wen Ruchun's husband has been an official at the China Banking Regulatory Commission, according to online database China Vitae.

For Wen Ruchun's consulting firm, Fullmark Consultants, the JPMorgan deal was lucrative. While many Hong Kong investment bankers were earning as much as US$250,000 a year, JPMorgan paid her firm US$900,000 annually from 2006 to 2008, records show, for a total of US$1.8 million.

JPMorgan appeared to benefit from the relationship as well. Fullmark claimed in a confidential letter to the bank that it "introduced and secured" business for JPMorgan from the state-run China Railway Group, a construction company that builds railways for the central government. The bank was an underwriter in the company's 2007 initial public offering, which raised about US$5 billion.

It is not known whether Wen Jiabao played any role in that deal. But as premier he would have had ultimate responsibility for state-owned companies and their regulators.

In a previous regulatory filing, the bank said authorities were examining "its business relationships with certain related clients in the Asia Pacific region and its engagement of consultants".

The documents do not identify a concrete link between the bank's decision to hire children of Chinese officials and its ability to secure coveted business deals, a connection that authorities would probably need to demonstrate that the bank had violated anti-bribery laws.


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This article is now closed to comments

The USA and other countries have laws against bribery and corruption. Where are China's? I supposes this comes under the Orwellian: "All animals are equal, but some animals are more equal than others."
This is what Bill Bishop - probably the most important
Sinologist blogger out there says about this story:
"story of JP Morgan buying influence thru Wen Jiabao's daughter is page 1 in Thurs paper. her pic on p 1. Wow. Huge"
Those of you that think this is not a big story need to think about how badly wrong you are in your assessment. Similarly those who view the SCMP as in the back pocket of the CCP need to re-think your judgements.
It's true. Gross corruption is legal and thriving in America. It's called various glorified names such as campaign contributions and lobbying. But the New York Times wouldn't dare to upset its advertisers would it?
depending on the work, value and size of the deal, I do not what is the big fuss about this. USD 1.8 million dollar in consulting fees could be chicken fees if it is a multi-million or billion dollar deal. Also, value has nothing to do with # of employees, there are plenty of CEO get paid by the millions yearly.
If you think the West functions differently, you are in for a wakening.
Small potato comparing to granting posts such as ambassadorship or lucrative directorships, all legal.
Slightly different to have the supreme leader's daughter pimping time. If you have evidence, that would be interesting.
Time to start quoting ancient poets, Mr. Wen to dispel any myths that them paying your daughter piles of money could have impacted your decisions on matters. How could he have done such a thing if he can quote an ancient poet.
If you would read the NYT everyday as I do you would find out they also show all the influence peddling in the USA and how the dirty lobbying works. Not just looking at China.
are you sure Confucius isn't involved in some way?
The NYT gives a detailed overview of the links between the different parties involved in the deals. Explains why Chinese government people hate those investigative journalists. They prefer we do not have a clue, especially if tigers are involved. Flies are OK. So, blackmail Bloomberg, expel the good journalists, block certain websites.




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