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Financial Services/Private Equity
New York, New York, United States
Nationality of Foreign Officials: Brazil
Summary of Allegations:
A Reuters article from 22 September 2021 reports that Brazilian authorities are investigating whether JPMorgan was involved in an alleged bribery and money laundering scheme relating to Brazilian state-owned oil company, Petrobras. The conduct, which dates back to 2011, relates to the sale of approximately 300,000 barrels of fuel oil that may have been provided at artificially low prices and that included bribes paid Petrobras trading employees.
Approximate Alleged Payments to Foreign Officials: unknown
Business Advantage Allegedly Obtained: obtaining fuel oil at artificially low prices
Nationality of Foreign Officials: China
Summary of Allegations:
Between 2006 and 2013, J.P. Morgan Chase & Co. ("JPMorgan") allegedly provided employment and internships to the relatives and friends of key executives of its clients, prospective clients, and foreign government officials in the Asia-Pacific region (“APAC”) as a personal benefit to the requesting officials. Many of JPMorgan's clients were state-owned entities. JPMorgan allegedly did so with intent to influence the requesting foreign govenrment officials into helping the firm obtain or retain investment banking business or other benefits for JPMorgan.
During this period, investment bankers at JPMorgan Securities (Asia Pacific) Limited (“JPMorgan APAC”), JPMorgan's subsidiary in Hong Kong, allegedly created a special hiring program ("Client Referral Program" sometimes referred to as "Sons and Daughters Program") for referred candidates that allegedly bypassed the firm’s normal hiring process and was made available exclusively to candidates referred by clients, prospective clients, or foreign government officials. Non-referral JPMorgan APAC hires were subjected to a rigorous screening process and competed against other candidates for a limited number of positions. Referral hires allegedly did not compete against other candidates based on merit and, in most instances, were allegedly less qualified than those employees hired through the firm’s non-referral hiring programs. Instead, referral hires were allegedly hired based on direct or potential links to investment banking revenue that could be generated from the referring client in exchange for the hire. Referral hires whose relationships generated sufficient revenue for JPMorgan APAC were allegedly offered longer-term jobs, while others were given shorter terms of employment unless the referring client offered additional business to the firm.
Through this Program, JPMorgan allegedly hired approximately 200 referred hire interns and full-time employees, including 100 candidates referred by foreign government officials from more than twenty different Chinese state-owned entities. In exchange, the referring state-owned entities allegedly entered into business transactions with JPMorgan that resulted in more than USD 100,000,000 of revenue for JPMorgan APAC.
Examples of JPMorgan's alleged corrupt hiring practices were reported in the media. JPMorgan allegedly hired the son of the chairman of China Everbright Group, a state-controlled financial conglomerate, and JPMorgan allegedly secured multiple assignments from the conglomerate as a result. JPMorgan is also alleged to have hired the daughter of a Chinese railway official. This official has since been detained on accusations of awarding government contracts for cash bribes. The daughter of this official joined the Company around 2007, at a time when The China Railway Group was in the process of selecting JPMorgan to advise on its plans to become a public company. In addition, JPMorgan alleged to have hired the son of a Chinese commerce minister. The son was hired in 2007 despite allegedly receiving poor interviews and negative reviews. When the son was facing a layoff, the official allegedly informed JPMorgan that he would "go extra miles" for the bank if they did not fire his son.
Despite JPMorgan APAC employees' alleged understanding of risks of violating the FCPA through such hiring practices, JPMorgan APAC employees allegedly often provided inaccurate or incomplete information as part of the legal and 3 compliance review designed to prevent these violations or withheld key information so that the referral hires would pass compliance review. JPMorgan allegedly failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to detect or prevent its employees' violation of the FCPA and company policies.
Approximate Alleged Payments to Foreign Officials: employment and internships to the relatives and friends of key executives of its clients, prospective clients, and foreign government officials
Business Advantage Allegedly Obtained: obtain or retain investment banking business or other benefits resulting in more than USD 100,000,000 of revenue for JPMorgan APAC
Nationality of Foreign Officials: Libya
Summary of Allegations:
JPMorgan reportedly may have violated antibribery laws, including the FCPA, in the company's dealing with Libya's government-run investment fund, the Libyan Investment Authority.
In the years leading up to Libya's 2011 revolution, group of middlemen, reportedly known as "fixers" operating in the Middle East, London and elsewhere, allegedly established connections between investment/financial firms like JPMorgan and individuals with ties to Libyan officials under the Gadhafi regime. The fixers, at times, allegedly collected a "finder's fee" in arranging the alleged deals between the firms and the officials. These fees reportedly may have been funneled to the officials on behalf of the firms as bribes in return for business.
Specifically, in September 2018, the LIA filed a lawsuit against JP Morgan Chase & Co for paying $6 million bribes to secure its $200 million bond deal back in 2007.
Bear Stearns paid Qaddafi’s connection Walid Al-Giahmi and his firm Lands Company Ltd for sham structuring services. Giahmi then bribed LIA’s executives, including Mustafa Zarti to enter the bond agreements.
The bribery scheme occurred before JP Morgan’s acquisition of Bear Stearns Companies, Inc. ("Bear Stearns") in 2008, with $4 million transferred by Bear Stearns and $2 million by JP Morgan in 2009.
Approximate Alleged Payments to Foreign Officials: $6 million
Business Advantage Allegedly Obtained: $200 million bond deal
Agencies: Hong Kong: Independent Commission Against Corruption
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 26 March 2014, Hong Kong's anti-corruption agency, the Independent Commission Against Corruption ("ICAC"), searched a JPMorgan office in Hong Kong. ICAC seized computer records and documents after searching the office of Mr. Fang, the company's outgoing chief executive officer for China investment banking. On 23 May 2014, Mr. Fang was arrested by ICAC.
Agencies: Internal Investigation
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
A Bloomberg article from 28 August 2013 states that the bank has opened an internal investigation flagging more than 200 hires for review. The inquiry began in Hong Kong, but has not extended to countries throughout Asia and has included interns, as well as full-time workers. The employees include politician's family members who worked at JPMorgan's investment bank as well as relatives of asset-management clients.
A Wall Street Journal article from 12 September 2013 reports that JP Morgan, "plans to spend an additional $4 billion and commit 5,000 extra employees this year to clean up its risk and compliance problems, according to people close to the bank." The article implies that these additional measures and expenses are in part related to earlier reports of the company giving preferences to hiring the children of Chinese government officials.
Mr. Abdelnour left JPMorgan in 2012. Mr. Fang resigned from JPMorgan in March 2014. JPMorgan dismissed Mr. Marin and arranged for Ms. Leung to leave in February 2015. None have been accused of wrongdoing by authorities in the United States.
In July 2016, Wall Street Journal reported that JPMorgan is expected to pay around USD 200 million to reach a settlement with the authorities in the upcoming months.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Criminal Fine, Disgorgement, Non-Prosecution Agreement
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:
According to its Form 10-Q filed with the SEC on 7 August 2013, JPMorgan received "a request from the SEC 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." The NY Times article and leaked confidential U.S. government document outlines that the SEC's request hints at overall hiring strategy in the Company's Chinese offices. JPMorgan is also being investigated by the U.S. Department of Justice ("DOJ") for possible violations of the U.S. Foreign Corrupt Practices Act ("FCPA") related to the company's hiring practices. The SEC and DOJ have both requested information from the company concerning communications with 35 high-ranking Chinese officials, including the head of China's anti-corruption campaign, Wang Qishan. Other officials include Guo Shengkun (Minister of Public Security), Pan Gongsheng (Vice Governor of the People's Bank of China), Frank Gaoning (chairman of Cofco Corp.) and Sun Jiakang (senior executive at Cosco Group), as well as officials at the Assets Supervision and Administration Commission and regulators for securities, banking and insurance.
According to media reports in April 2015, JPMorgan is preparing a white paper to submit to the SEC and the DOJ, which will set out JPMorgan's concern that the U.S. government is "overreaching" by attempting to criminalize what is standard business practice in some countries.
On 17 November 2016, JPMorgan entered into cease-and-desist order with the SEC to settle the charges that the company violated the anti-bribery, books and records, and internal controls provisions of the FCPA. As part of the settlement, JPMorgan agreed to pay disgorgement of USD 105,507,668 and prejudgment interest of USD 25,083,737, for a total payment of USD 130,591,405 to the SEC.
The order noted that the SEC is not imposing a civil penalty based upon the DOJ's imposition of a USD 72,000,000 criminal fine as part of JPMorgan APAC's settlement with the DOJ. Furthermore, the SEC noted its consideration of JPMorgan's thorough, complete and timely cooperation and remedial efforts to address the risks inherent in client referral hiring in determining the settlement. For example, JPMorgan ceased the Client Referral Program, in JPMorgan APAC and enhanced ts anti-corruption compliance program and hiring practices on a global basis, and enhanced its overall compliance function in the APAC region.
On the same day, 17 November 2016, JPMorgan APAC entered into a non-prosecution agreement with the DOJ that acknowledges responsibility for criminal conduct relating to scheme to gain business advantage by providing internships and employment to relatives and friends of Chinese government officials. As part of the agreement, JPMorgan agreed to pay USD 72 million criminal fine, reflecting an aggregated discount of 25 percent off the bottom of the US Sentencing Guidelines fine range, to the DOJ.
In reaching the resolution, the DOJ noted its consideration of several factors. Although JPMorgan APAC did not voluntarily and timely disclose the matter, JPMorgan did cooperate with the investigation including its conduct of a thorough internal investigation, making foreign-based employees available for interviews in the US and producing documents to the government from foreign countries in ways that did not implicate foreign data privacy laws. In addition, JPMorgan APAC also took significant remedial actions, including employment action against six employees who participated in the misconduct resulting in their departure from the bank, and disciplining additional 23 employees who, although not involved in the misconduct, failed to effectively detect the misconduct or supervise those engaged in it. Furthermore, JPMorgan APAC imposed more than USD 18.3 million in financial sanctions on former or current employees in connection with the remediation efforts.
In addition to the sanctions imposed by the SEC and DOJ, the Federal Reserve System’s Board of Governors issued a consent cease-and-desist order and assessed a USD 61.9 million civil penalty.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
According to the media reports, the DOJ and the SEC are investigating the Libyan allegations to determine whether JPMorgan violated the FCPA.
Agencies: United States: Federal Reserve Board
Results: Suspension/Debarment
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 10 March 2017, the Federal Reserve Board initiated enforcement proceedings against Fang Fang and Timothy Fletcher, former managing directors at J.P. Morgan Securities (Asia Pacific) Limited, for their role in JPMorgan's hiring program. The Federal Reserve Board seeks to fine Fang USD 1 million and Fletcher USD 500,000, and permanently prohibit both from working in the banking industry.