The Wall Street Journal has published a story on a document generated as part of the government’s FCPA investigation into J.P. Morgan Chase which details the hiring of family members or friends of executives in most of the major Chinese IPOs the investment bank took public in Hong Kong. The individuals were hired into the bank’s intern program, known internally as the Sons and Daughters program.
The U.S. government has been investigating the company for potential violations of the federal securities laws because of this practice for at least the past two years. The Foreign Corrupt Practices Act prohibits U.S. issuers (public companies trading on a stock exchange), companies and citizens from giving anything of value to foreign officials, which includes employees of state-owned enterprises, to obtain or retain business.
The Wall Street Journal article explicitly names a handful of referral sources for the intern program that were working at state-owned companies. Internal documents reportedly captured JPM employees discussing the business benefits of hiring the referrals into their intern program. Government officials are still looking for a connection to the subsequent awarding of business following the hiring of the individuals.
According to the document which was produced by the company to the government as part of their internal investigation, the investment bank hired 222 individuals referred by business contacts, and 44.6% of those were referred by government officials or employees of state-owned companies. The program ran from 2004 to 2013.
This is part of an industrywide investigation into investment banks for their employment hiring. BNY Mellon already agreed to pay $14.8 million to the SEC this summer to resolve the government’s FCPA investigation into its intern program.
There has been no mention yet in the press concerning any FCPA whistleblowers connected to these government inquiries. However, the SEC has received around 500 tips concerning violations of the law since the whistleblower program started in 2010-11.