JP Morgan's Sons and Daughters

Back in August, JP Morgan received a subpoena from the SEC inquiring about its hiring practices in Hong Kong and China.  (Other banks have since received similar inquiries, according to this report). As reported back then, the government was investigating the bank's hiring of "princelings," the sons and daughters of Chinese government officials.   The story was that American banks were hiring government officials' family members as consultants with the hope that these well-connected children would feed the banks underwriting deals, although according to this article, the princelings' value had already dropped by the time the SEC's (and soon after DOJ's) investigation heated up.  

As others pointed out, hiring government family members who are otherwise qualified may be unseemly, but it doesn't necessarily violate the Foreign Corrupt Practices Act.  The bank would have run afoul of the statute, however, if it had corruptly hired said persons with the intent of securing an improper advantage from Chinese government officials.  For a nice discussion of these matters, see Mike Koehler's earlier discussion on his FCPA Professor blog here. 

As of this moment, JP Morgan has produced to government investigators some documents that sound at least somewhat damning.

On one hand, it seems the bank itself created a separate track for its "Sons and Daughters" hiring program, which was intended to prevent allegations of bribery under the Foreign Corrupt Practices Act by requiring more stringent controls on hiring.   But there appears to be this pesky spreadsheet that JP Morgan executives in China maintained, which appears to track JP Morgan's deals to some of its Chinese hires - including some of those "Sons and Daughters."  In other words, someone appeared to be keeping track of the "benefits" brought in by the children of government officials.  The NYT Dealbook reports that "sources" close to the bank contend that the spreadsheet was not intended to track deals to its Son and Daughters hires, but rather, "assess whether JPMorgan bankers, in hopes of securing full-time jobs for some interns in the program, had exaggerated the revenue received from state-owned companies."   Odd point of interest: this spreadsheet was known and discussed in the press back in August, but Dealbook brought it back to the fore in a December 7th report, when it also discussed some emails that JP Morgan executives had written (some of the more troubling emails - about a recent hire who likes to nap alot - do not involve the children of foreign officials and therefore should not trigger FCPA concerns).  

Ordinarily, I might say, "hey, this sounds like a continuing headache for JP Morgan."  But then my more optimistic side kicks in.  (Yes friends, I actually have one).  Perhaps the spreadsheet is not as bad as it sounds, and emails can be reported out of context.  And besides, even if this investigation does result in some fine, it won't come close to the size of JP Morgan's previous penalty.