If you’ve been following news in China, then you may have heard about China’s Tianhe Chemical’s IPO. This IPO was one of the larger ones in China in recent memory, netting $654 million dollars in a Hong Kong based debut. Now questions are being raised over the hiring of CEO Wei Xuan’s daughter.

Tianhe Hiring

Two of firms who ultimately worked on the IPO, UBS and Investec, had hired Ms. Joyce Wei, while a third, JP Morgan, backed off the IPO after being investigated for hiring relatives of well-connected people.

The Tianhe Chemical’s IPO was the fourth biggest in Hong Kong this year, and those banks that were able to sell their services to the company must have certainly pocketed a tidy profit. The incentives for any attempt at bribery were certainly there, but does hiring a relative of major business leader really constitute an illegal act?

After all, if the person being hired is well qualified, would it be right to decline hiring them simply because their relative is well-connected and it might raise some questions? Further, proving that the person in question was hired due to their connections, not their qualifications, may prove to be difficult in court.

JP Morgan Case Drawing Attention

JP Morgan has been under investigation for hiring the children and other relatives of well-connected people. In this case, regulators have found internal evidence suggesting that the company has been hiring people solely based on their connections to powerful people. Emails and other pieces of information have been found supporting these accusations.

This would appear to constitute illicit activities and even bribery as companies, including JP Morgan, have been using tactics that would otherwise disrupt market competition. By leveraging connections, companies may be able to exert influence over potential decision makers.

American regulators have been looking into the issue of hiring well-connected children, but for now are limiting themselves to the hiring of children and relatives of well-connected Chinese government officials. Since Tainhie is a private company, it is currently not under the scope of investigation but this isn’t stopping people from asking questions.

Daughter Demanded Perks From JP Morgan

Apparently, people close to internal investigations now being conducted into Ms. Wei’s employment have seen emails suggesting that JP Morgan was making a conscious effort to recruit Ms. Wei and to secure her support. Emails suggest that Ms. Wei began making increasing demands for increased perks and pay.

Emails have even been uncovered with JPMorgan Chase & Co. (NYSE:JPM) employees admitting, in writing, that Ms. Wei was hired due to her connections. Tainhe has claimed that her employment had no effect on their decision over who to hire.

Of course, it will be up to regulators to make the final decision on whether or not any violations took place.