Banks Object to FCPA Probes on Hiring

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Wall Street banks are disputing bribery investigations into their hiring of relatives of state-owned company employees, according to the Wall Street Journal. The banks claim that the Foreign Corrupt Practices Act bars only hiring done to win specific business. They argue that the law as interpreted by the SEC punishes them for hiring well-connected individuals who are qualified for their positions.

I agree with the commentary in the WSJ article that the arguments seem like posturing prior to settlement negotiations. Only one public company has challenged an enforcement action concerning FCPA violations in court. Because most cases are settled without creating judicial precedent interpreting the law, an 11th Circuit ruling in Esquenazi last year on the definition of an instrumentality made significant headlines as the first appellate court interpretation of the term foreign official in the law. It’s unlikely that we actually get a court ruling addressing this issue from a challenge by one of the banks.

A number of Wall Street banks are the target of FCPA investigations into their hiring practices right now. The investigation into J.P. Morgan Chase related to its hiring of the sons and daughters of Chinese government officials is one of the farthest along. A Bank of New York Mellon settlement of its hiring of relatives of officials at a so far unnamed sovereign wealth fund is expected in the coming months. BNY Mellon received a Wells Notice at the end of 2014 informing it of the SEC’s preliminary determination to proceed with an enforcement action.

A Wall Street Journal article published in 2013 indicates that government regulators have been closely watching hiring practices at pharmaceutical and energy companies for some time. The inquiry into the connection between hiring practices and bribes in the financial industry seems to have started around 2010.

If you are aware of a company in a different industry, please contact one of our FCPA whistleblower attorneys to discuss reporting it to the SEC program. You may qualify for a reward of between 10 and 30 percent of any monetary sanction over $1 million that results from your information.

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