China probe is latest legal headache for JP Morgan
Practice of hiring politically-connected bankers in China was widespread in early to mid-2000s, when Wall Street firms chased mandates to manage the multi-billion dollar stock offerings of China’s big state-owned enterprises
A federal bribery investigation into whether JPMorgan Chase hired the children of key Chinese officials to help it win business is just the latest in a series of legal and regulatory headaches for chief executive Jamie Dimon.
Dimon piloted the bank through the financial crisis, but it is now facing at least a dozen investigations from federal agencies and state and foreign governments, including over the “London Whale” trading scandal that cost it more than US$6.2 billion.
In the latest probe, the Securities and Exchange Commission (SEC) is looking at whether the bank’s Hong Kong office hired the children of powerful heads of state-owned companies in China with the express purpose of winning underwriting business and other contracts, a person familiar with the matter said.
The SEC is questioning JPMorgan’s relationships with at least two families in China that may have legitimate explanations, the source said.
US law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be bribery, and the SEC is investigating JPMorgan’s actions under the US Foreign Corrupt Practices Act.