The SEC is investigating JP Morgan for bribery over reports that the company has been giving jobs to the children of powerful officials in order to win business in China. A recent examination of the company’s “Sons and Daughters” program, which was designed to prevent nepotism, found that the program instead did the opposite, providing the children of well-connected Chinese families with a fast-track to cushy jobs with the firm. Often, these elite hirings were closely followed by lucrative deals with the new employees’ family businesses. The New York Times reports:
One striking example was the hiring of Tang Xiaoning, whose father is the chairman of the China Everbright Group, the state-controlled financial conglomerate.Before the hiring in 2010, the bank’s business with China Everbright was limited, if not nonexistent, based on a review of securities filings and news reports. Since then, though, JPMorgan won a steady flow of business. In 2011, China Everbright’s banking subsidiary picked JPMorgan as one of 12 financial advisers on its decision to become a public company, a common move in China for businesses affiliated with the government. While that deal was delayed amid global economic turmoil and questions about China’s banking system, JPMorgan has since secured other coveted business from China Everbright.In 2012, for example, JPMorgan was the sole bank hired to advise China Everbright International, a subsidiary focused on alternative energy businesses, on a $162 million sale of shares, according to Standard & Poor’s Capital IQ, a research service. JPMorgan also advised the China Everbright Group on its role in what was, according to the research firm Dealogic, the largest-ever private equity deal in China.
This example was only one of many uncovered in the investigation.We’re glad to see this ugly practice getting some legal scrutiny, but we believe the focus should be expanded beyond China. Here in the United States, our unprincipled politicians and greedy business elite have engaged in orgies of nepotism for a long time now. And the practice seems to be gaining momentum with the children or spouses of famous politicians (see Chelsea Clinton or Jenna Bush) landing network television gigs and other plums. To get some insight into how this dirty game is played, take a look at This Town, the excellent book by Mark Lebovitch examining the culture of corruption in Washington.We’re going to be looking out for more stories like these, because elite corruption, crony capitalism and the cozy ménage a trois of big government, big business and big media are direct threats to the rule of law and the culture of virtue that make freedom possible. Sons, daughters, nephews, nieces, spouses and other connections of famous people shouldn’t jump to the head of the line for prestigious jobs, and when it happens, people should know about it and discuss it openly. Conflicts of interest when lobbyists hire politicians’ wives or elite kids, or when investment banks fast track the entitled, aren’t “victimless crimes.” They hurt the bright and hard working people who don’t have special connections. They hurt the American polity by corrupting our institutions and our society.China suffers under a corrupt, entitled elite of “princelings” and others who are looting the state and laying the foundations for a titanic and destructive social explosion. Our problems in the US are not yet at that scale, but they are large, and they are growing. Most of the people involved know in their hearts that they are doing wrong; Via Meadia hopes that public exposure and accountability will strengthen the self respect and self control in our elites. We hope this will ensure that fewer of them will be caught doing anything as un-American and shameful as using a public position to get good jobs for their kids, and that media companies and others (are you listening, NBC?) will realize that the public relations blowback from hiring the children of the rich and famous can be severe.[Washington, DC photo courtesy of Shutterstock]