JP Morgan Chase has agreed to pay $264 million to settle regulatory matters brought by the U.S. Department of Justice, the Securities & Exchange Commission (SEC), and the Federal Reserve over allegations that the firm violated the Foreign Corrupt Practices Act with a hiring program giving jobs to friends and relatives of government officials in Asia.
The bank will pay $130 million to the SEC after allegations surfaced that investment bankers at its Asia-Pacific subsidiary created a JP Morgan Chase hiring program called the “Sons and Daughters Program,” aimed specifically at hiring candidates referred by client executives and government officials.
An additional $72 million will be paid by JPMorgan Securities Ltd as a criminal penalty to the DOJ, and another $61.9 million will be paid to the Federal Reserve. According to the SEC, the “misconduct was so blatant that JPMorgan investment bankers created spreadsheets to track the money flow from clients whose referrals were rewarded with jobs.” Apparently, not a single referral hire request was ever denied.
The “Sons and Daughters Program” was created in 2006 to accommodate frequent requests from clients and government officials to provide internships and entry-level employment to relatives and friends. The goal was to boost business by extending favors to those doing the referring. The program was revamped in 2009 to prioritize hires linked to upcoming client transactions.
Although bankers were required to complete a questionnaire designed by the legal and compliance teams to screen potential hires for conflicts and violations of the FCPA, employees allegedly modified the questionnaires and falsified answers to hide their true purpose in hiring candidates. By structuring contracts to begin and end before the end of the year so the employees would not be counted in JPMorgan’s internal headcount, hiding candidates from scrutiny.
Over a period of seven years, JPMorgan hired 100 interns and full-time employees, helping the firm win or retain business in excess of $100 million. JPMorgan will also undertake a remediation of its FCPA and anti-corruption compliance programs in addition to the fine.
Do You Suspect Your Firm of Violating the Foreign Corrupt Practices Act?
Large banks and brokerage firms are not exempt from investigation and wrongdoing. If you suspect that your firm may have violated the FCPA, contact an experienced Los Angeles securities fraud attorney today to discuss your rights and options.