According to knowledgeable Wall Street Journal sources, a number of senior execs at JPMorgan Chase & Co. (NYSE:JPM) in New York were advised of potential problems related to the bank’s hiring practices in China more than a year before the hiring program came under investigation by U.S. regulators.
JPMorgan has noted in securities filings that federal regulators began asking about the firm’s China hiring practices in 2013, and that both the SEC and the Justice Department are investigating the matter.
One of the WSJ sources said that the regulatory scrutiny over hiring influential people in China is really part of a broader investigation involving several banks that could lead to enforcement action.
Of note, to date U.S. regulatory authorities haven’t alleged any criminal activity by JPMorgan or its employees in New York or Asia.
Tip from Asian bank official
According to emails reviewed by the WSJ, an Asian bank official notified legal and compliance executives in New York in 2011 through back channels of anonymous claims that the bank’s recruitment of a prominent son of a senior Chinese official helped it land investment-banking business. JPMorgan officials held meetings to discuss the accusations, and then changes to the hiring practices for the region were suggested, based on the emails.
Those fixes ended up included as part of a broader set of anti-corruption measures approved by board directors on the bank’s audit committee in late 2011, according to the WSJ sources. JPMorgan Chairman and Chief Executive James Dimon was at least aware of the broader anticorruption measures as the new program rolled out, these people also noted.
The documents offer the first evidence to date that executives outside Asia were aware of accusations about the bank’s foreign recruiting before federal officials started asking questions about the bank’s practices. JPMorgan first disclosed the federal scrutiny in August 2013.
Earlier statement from JPMorgan Chase CEO Dimon
JPMorgan Chase & Co. (NYSE:JPM) Jamie Dimon noted in a January 2014 interview on CNBC that it has been a “norm of business for years” for financial institutions to hire “sons and daughters of companies” and to set them up with “proper jobs” without violating the law.
“But we got to figure out exactly how to create a safe harbor for that so you don’t…end up getting punished,” he explained in completing his answer to the question.