Update | JP Morgan Chase faces US probe for hiring Chinese princelings
JP Morgan Chase was caught in the spotlight yesterday after media reports suggested the bank hired sons and daughters of senior Chinese officials in the hope of winning deals from major state-owned enterprises.
The revelation of JP Morgan's hiring of the son of China Everbright Group's chairman and a former railway official's daughter comes at a sensitive time for Sino-US relations.
reported on its website yesterday, citing a confidential US government document, that the US administration had opened an antibribery-related investigation into JP Morgan. Specifically, it was probing the bank's hiring of the son of Tang, who is a former top banking regulator before he became China Everbright Group chairman. The investigation would also look into the bank's hiring of the daughter of Zhang Shuguang , former deputy chief engineer of China's railways ministry, for the bank's Hong Kong office.
A JP Morgan spokeswoman told the that the bank had already disclosed relevant matters in a regulatory filing on August 7. In the filing, the bank said it received "a request from the [US] SEC [Securities and Exchange Commission] Division of Enforcement seeking information and documents relating to, among other matters, the firm's employment of certain former employees in Hong Kong and its business relationships with certain clients." No names were mentioned in JP Morgan's August 7 filing.
"We are fully co-operating with regulators," the spokeswoman added without elaborating further.
The investigation did not surprise China's banking community. Some online readers described such practices as an "open secret and global practice" as many Western leaders' sons and daughters often went to top financial institutions. For example, Chelsea Clinton, the only child of former US president Bill Clinton, joined Avenue Capital Group, a US$12 billion hedge fund, in 2006 when she was 26.
Tang's son and Zhang's daughter were not alone. Industry sources told the that the daughter of Vice-Premier Wang Yang had worked for a major European investment bank for many years in Hong Kong. The daughter of Han Zheng used to work for Standard Chartered Bank in Shanghai, where her father was the city's top official.
"It is not at all unusual for investment banks to hire wellconnected people, including children of management of existing or potential clients, whether in China or in other countries," said David Webb, a former investment banker and now a well- known independent investor and analyst in Hong Kong.
"However, if there is an indirect kickback going on, for example, by paying a large bonus linked to the winning of business from the employee's father's company or the government, or even putting the child on the payroll without actually requiring him to work, then that could be corruption and should be investigated by the relevant authorities, including Hong Kong's ICAC if the offence took place here," Webb added.
