U.S. officials are investigating numerous cases linked to JPMorgan Chase & Co. (NYSE:JPM) and its practices. Those cases are piling up the bank’s legal debts and raising questions about its ethical practices—specifically in China where its hiring practices are being investigated.
And they come at a time when the bank is still reeling from the effects of the London whale investigation.
Growing problems for JPMorgan Chase
Dan Fitzpatrick of The Wall Street Journal reports that JPMorgan Chase could have to absorb $6.8 billion in legal costs above its current reserves. That’s according to a regulatory filing which also mentions six different investigations being conducted by the Department of Justice and another probe from the Securities and Exchange Commission.
Research from Barclays suggests that the amount is higher than the legal costs of any other bank in the U.S. Bank of America Corp (NYSE:HAC) currently has the most legal problems of all big lenders, but JPMorgan Chase & Co. (NYSE:JPM) could surpass the bank if its losses add up to $6.8 billion.
JPMorgan Chase’s hiring in China probed
The investigation being conducted by the SEC is being done in the agency’s anti-bribery unit. The filing indicates that regulators are trying to determine if JPMorgan Chase hired the children of prominent Chinese families in exchange for receiving their business. Over the weekend the New York Times reported on additional details from a confidential document which explained the investigation further.
That report indicates that the document doesn’t formally accused JPMorgan Chase & Co. (NYSE:JPM) of wrongdoing or suggest that the people hired were not qualified for the positions they were hired to fill. It does, however, provide some details on the hiring practices used by the bank’s Chinese operations.
Other banks affected by JPMorgan’s investigation
Lawrence White and Michael Flaherty of Reuters report that the investigation into JPMorgan Chase’s hiring practices in China is sending ripples throughout the investment banking industry. According to their report, lawyers believe other banks will be combing through their own records to examine their hiring practices, especially in China.
They report that it’s fairly common for banks like JPMorgan Chase & Co. (NYSE:JPM) to hire workers with ties to the government, although it’s even more common for this to happen in China because of the Communist Party’s tight controls. Although laws in the U.S. do not keep companies from hiring executives who are connected politically, hiring executives for the purpose of winning business can be bribery.
A lawyer based in China said it’s likely that JPMorgan’s competitors are starting internal investigations to look into their relationships with the children of prominent Chinese families. Several other international banks, including Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC) and Goldman Sachs Group Inc (NYSE:GS), have hired those related to Chinese officials within the last five years.