By Dan Fitzpatrick
16 hours ago
The emails are among the documents the largest U.S. lender by assets handed over to prosecutors as federal officials widen their scrutiny of foreign recruitment practices on Wall Street.
Bloomberg News J.P. Morgan CEO James Dimon J.P. Morgan, Citigroup Inc., Morgan Stanley, Goldman Sachs Group Inc., Credit Suisse and Deutsche Bank AG are now the subjects of Securities and Exchange Commission inquiries into whether the firms hired family members of foreign officials with the intent of winning business, according to people with knowledge of the inquiries. The U.S. Attorney's Office in Brooklyn, N.Y., is also examining J.P. Morgan's hiring practices.
Investigators are looking for violations of the U.S. Foreign Corrupt Practices Act, a 1977 law that bars U.S.-based or U.S.-listed companies from giving money or other items of value to foreign officials to win business. They must find clear evidence linking the recruitment of an employee to winning a new contract or generating increased revenue, according to legal experts.
J.P. Morgan disclosed the SEC and Justice Department probes earlier this year and launched its own investigation with help from outside counsel as it examined roughly 200 hires across its Asian operations. It discovered e-mails from an executive who encouraged the hiring of Tang Xiaoning—son of the chairman of China Everbright Group—and touted the potential for business with the state-backed conglomerate that owns China Everbright Bank as well as a brokerage and insurer, said the person familiar with the messages. Everbright couldn't immediately be reached for comment.
A J.P. Morgan spokesman declined to comment on Sunday about the emails, which were first reported by The New York Times. Attempts to reach Mr. Tang, who has left the bank, were unsuccessful. J.P. Morgan, Mr. Tang and his father have not been accused of any wrongdoing. It isn't known exactly when Mr. Tang started at the bank, or when he left.
J.P. Morgan became an adviser to China Everbright in 2011 when the bank first tried to list in Hong Kong in an attempt to raise up to $6 billion. It was also an underwriter last year when China Everbright tried again to list in the city. That IPO didn't come to fruition because of weak market conditions. Last month J.P. Morgan withdrew from underwriting China Everbright's new $2 billion initial public offering in Hong Kong, according to people with knowledge of the deal.
J.P. Morgan's internal investigation also has uncovered spreadsheets that listed names of foreign hires and in some cases the high-ranking officials these hires had as relatives, said the person familiar with the probe. There were several versions of these spreadsheets produced before they were abandoned, this person added. The hiring of connected recruits was known to some within the company as the "sons and daughters" program, added people close to J.P. Morgan.
But having an influential hire didn't always automatically translate into new business and often would only have a marginal sway in winning a key mandate for a new stock offering or bond deal, according to one former senior J.P. Morgan executive who was aware of the "sons and daughters" program.
"It is certainly helpful in terms of pointing banks in the right direction," this person said "but when it came to mandates, definitely not."
In some cases J.P. Morgan has determined that the hiring of a well-connected executive was entirely appropriate. One such example involves Edmund Lee, who was hired this year as head of J.P. Morgan's Singapore operations.
Mr. Lee's appointment was announced in an August memo and an October press release, but neither document disclosed his connections to some of Singapore's most powerful figures. Mr. Lee is the first cousin of the city-state's prime minister, Lee Hsien Loong, and a nephew of founding Prime Minister Lee Kuan Yew, who led Singapore from 1959 to 1990 and serves on a J.P. Morgan international advisory board.
Part of Mr. Lee's job involves the management of J.P. Morgan's relations with business, government and regulators in Singapore.
The internal probe determined Mr. Lee's recruitment didn't run afoul of U.S. laws and that he was hired to fill a specific need—an opening left by Philip Lee, who left J.P. Morgan for Deutsche Bank—and the move was appropriate because he arrived with three decades of experience in the financial services industry, said the person close to the probe.
Edmund Lee couldn't be reached for comment. The Singapore prime minister's office didn't respond to emailed questions, and the Monetary Authority of Singapore, which oversees banks in the city-state, didn't respond to a request for comment.
A spokeswoman for J.P. Morgan said that Mr. Lee was hired for his experience. Before working for J.P. Morgan, Mr. Lee spent 12 years as chairman and chief executive of DBS Vickers Securities, the brokerage arm of DBS Group Holdings Ltd, the region's biggest lender by assets. J.P. Morgan and DBS have frequently worked together on new stock offerings, including this year's listing of Taiwanese pay-television operator Asian Pay Television Trust.
In the case of Mr. Lee, neither the executive himself or J.P. Morgan have been accused of wrongdoing, and there isn't any indication that his appointment is under review by the Securities and Exchange Commission, the Justice Department or other authorities outside the U.S. that are conducting inquiries into J.P. Morgan's recruitment of bankers with links to government officials and the use of certain consultants in the Asia-Pacific region.
The Justice Department has ramped up prosecutions under the Foreign Corrupt Practices Act in recent years, with high-profile settlements involving multinational companies such as Siemens AG, Halliburton Co. and Johnson & Johnson.
Investment banks in China and throughout Asia long have hired employees with connections to big business or high-ranking contacts in government. Some have hired children of senior Communist Party figures who are commonly known as "princelings." International investment banks including Credit Suisse, Goldman Sachs, Citigroup, Bank of America Merrill Lynch and Macquarie Group have all brought the children of current or former political officials onboard.
There is nothing illegal about hiring the children of top officials, and most are well-qualified graduates of prestigious U.S. universities. None of the banks or the people they hired has been accused of any wrongdoing.
"In China, without such connections it is very hard to expand your business," said Wei Liqun of the Hong Kong Baptist University's Department of Management.
Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com, Enda Curran at enda.curran@wsj.com and Justin Baer at justin.baer@wsj.com
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