JPMorgan Fined $264 Million for Hiring Friends, Relatives of Potential Clients in China to Win Business

JPMorgan Chase has been ordered to pay $264 million in fines to settle charges that the bank gave jobs and internships to the relatives and friends of potential clients in China to win business in the country in violation of the Foreign Corrupt Practices Act, the Securities and Exchange Commission alleged Thursday.

According to an SEC order, many of JPMorgan's clients were state-owned entities and the client executives requesting employment for relatives and friends were foreign government officials under the FCPA.

Approximately 100 interns and full-time employees were hired over a seven-year period at the request of foreign government officials, the SEC said. The practices helped the firm win or retain business that resulted in more than $100 million in revenues for the bank.

The bank created a special hiring program called the "client referral program," thus bypassing the firm's normal hiring practices. According to the SEC, referral hires, in most instances, were less qualified than employees hired through the firm's non-referral hiring process. In all, the bank hired 200 interns and full-time employees through the client referral program referred to colloquially as the "sons and daughters program." According to the SEC, the conduct was so blatant that the bank created "Referral Hires vs Revenue" spreadsheets to track the money flow from clients whose referrals were rewarded with jobs.

“JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions on their own merit,” Andrew J. Ceresney, director of the SEC Enforcement Division, said in a statement. “JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative.”

JPMorgan has entered a non-prosecution agreement with the Department of Justice that acknowledges responsibility for criminal conduct relating to certain findings in the order.

“The conduct was unacceptable. We stopped the hiring program in 2013 and took action against the individuals involved,” JPMorgan said in a statement.

The bank will pay $130 million to the SEC, $72 million to the DOJ and a total of $61.9 million to the Federal Reserve Board of Governors.

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