United States probe of bank hires must go beyond Asian princelings
Ian Barclay and Seth Berman say the US probe into banks' hiring of Asian princelings has wider implications, including for companies that routinely employ the children of important clients
According to media reports, the US government is currently examining whether J.P. Morgan violated US anti-corruption laws by hiring the children of Asian government officials allegedly with the intent of bribing their parents to obtain business. What began as scrutiny of the company's Hong Kong office has since widened to encompass other Asian countries, and is reported to include other banks and hedge funds as well.
Executives from every sector are nervously considering their hiring practices, and wondering what the investigation might mean for them. After all, in Asia and beyond, busi-nesses have long recruited not only the best and the brightest but also the most well connected.
Examples of law firms, management consultancies, private equity firms, oil and gas companies and pharmaceutical giants hiring children of politicians and officials the world over are too numerous to mention.
Executives from every sector are nervously considering their hiring practices
It surely did not escape the notice of the management consultancy McKinsey that the then 22-year-old Chelsea Clinton, while undoubtedly well educated at Stanford and Oxford, was the daughter of a former president, a sitting US senator and potential future president.
The reality is that relationship banking is about precisely that - relationships. Access to key relationships is why the top banks have always hired those who can open doors and introduce new business - especially in new or less open markets. Indeed, the hiring of family members of influential people is not confined to the children of government officials.
It has long been common practice for companies to hire or provide internships to the children of key clients. This has led some people to wonder whether the current probe implies that the US government is attempting to rewrite the rules of hiring and to criminalise abroad conduct routinely practised at home.
Given that the investigation is in its early stages - J.P. Morgan has not been charged or even accused of any wrongdoing and may never be - it is a little hard to know the government's theory. However, it is almost certainly more nuanced than many are suggesting.
The US Foreign Corrupt Practices Act prohibits providing, with corrupt intent, anything of value to a foreign official to influence their decisions.