Hiring Scandal
In a November 1 article posted on its website, the New York Times (NYT) said that the US federal government is investigating JPMorgan’s hiring practices in Asia, including South Korea. Also, JPMorgan Chase announced on November 1 (local time) that the Securities and Exchange Commission and the Justice Department are examining its hiring practices through cooperation with local governments in the Asia-Pacific region, without naming specific countries.
The US newspaper reported that US authorities are focusing on South Korea, Singapore, India, and China. Due to growing controversy, JPMorgan itself is reported to be conducting internal investigations of possible wrongdoing involving its branches worldwide.
The article also said that the investigations are still in fledgling stages, but federal authorities appear to be zeroing in on the bank’s “Sons and Daughters” program. The program was created to hire the children of senior government officials in the Asia Pacific region with lax standards and simplified procedures.
According to NYT’s sources, JPMorgan was suspected of receiving preferential treatment while running the program, starting in 2006. For example, the company was chosen as one of 12 lead managers for the initial public offering of the China Everbright Group and the Group’s advisor on private equity deals.
NYT pointed out, “It is uncertain whether or not the hiring indeed led to unfair preferential treatment. But according to government authorities, China Everbright, which seemed to rarely do business with JPMorgan, suddenly emerged as one of the bank’s major clients, after the son of the Group’s chairman was hired.”
As Hong Kong and British authorities are also reported to be investigating the bank’s hiring practices, JPMorgan is likely to be under immense pressure from international society, on top of many legal battles in the US, including one involving its sales of fraudulent mortgages.
The Foreign Policy said, "The main focus of the Chinese government is on eradicating corruption of its elite. However, it has become increasingly tougher with bribers rather than bribed officials. Therefore, Beijing might sanction JPMorgan if preferential hiring is proven true.”