JPMorgan Chase & Co. (“JPMorgan”), the largest U.S. bank based on assets, has agreed to pay a $264 million fine to settle Foreign Corrupt Practices Act (“FCPA”) investigations into its preferential hiring program. The program, known internally as the Sons & Daughters Program, was created by investment bankers at its subsidiary, JPMorgan Securities Asia Pacific Limited. The FCPA, enacted in 1977, prohibits companies from paying money or “anything of value” to foreign officials in order to “obtain or retain business.”
The investigation, launched by the Securities and Exchange Commission (“SEC”) in 2013, probed whether JPMorgan violated the FCPA by giving jobs and internships to the friends and relatives of clients and government officials in the Asia-Pacific region, particularly in China, to win lucrative business deals. The investigation found that, between 2006 and 2013, JPMorgan hired hundreds of (typically unqualified) interns and employees at the behest of government officials and clients in Asia, and generated $100 million in revenues.
The $264 million settlement will be split among three U.S. government regulatory agencies: $130 million to the SEC; $72 million to the Department of Justice (“DOJ”); and $61.9 million to the Federal Reserve. By cooperating with the investigation, JPMorgan avoided criminal prosecution by the DOJ and entered into a three-year “non-prosecution” agreement requiring the bank to implement enhanced internal compliance programs. After the investigation, JPMorgan fired six employees who engaged in misconduct or failed to identify the problem. It also disciplined 23 additional employees who failed to detect the prohibited practices or acted at the direction of supervisors. The bank also penalized current and former employees $18.3 million for their actions.
In addition to investigating JPMorgan, government regulators reportedly contacted other big banks, including HSBC, Goldman Sachs, Deutsche Bank, Citigroup, and Morgan Stanley. The global banking community was put on edge by the investigation, as hiring well-connected people for financial jobs has been common in China.
“The so-called Sons and Daughters Program was nothing more than bribery by another name,” said Assistant Attorney General Leslie Caldwell. The assistant AG further stated that “[a]warding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple.”
JPMorgan spokesperson Brian Marchiony, said in a statement that “[w]e’re pleased that our cooperation was acknowledged in resolving these investigations. The conduct was unacceptable.” Marchiony added, “[W]e have also made improvements to our hiring procedures, and reinforced the high standards of conduct expected of our people,” noting that the bank’s commitment to the Asia-Pacific region “is as strong as ever.”