Last fall, reports began to surface that, in violation of the Foreign Corrupt Practices Act (FCPA), J.P. Morgan had been running a “Sons and Daughters” program; hiring children of several powerful Chinese officials as well as friends and family of leaders at “75% of major Chinese firms it took public”. The Wall Street Journal reports:
The settlement is expected in the coming months and would resolve criminal and civil matters under a foreign bribery probe that has dogged the bank for years. J.P. Morgan likely would admit that its hiring practices violated U.S. law but wouldn’t be charged criminally, the people said.
J.P. Morgan Chase is surely not the only company to engage in such behavior. It joins a diverse cohort of Western businesses, from Siemens to ENI, who have already settled on similar charges as they operate in markets where corruption is the name of the game.
The settlement is an encouraging sign that Washington is getting more serious about addressing the tacit cooperation Western enablers (i.e. bankers, lawyers, real estate agents, accountants) provide foreign kleptocrats, running counter to American principles and even at the cost of national security. The settlement news adds welcome momentum, coming on the heels of other promising corruption investigations into foreign kleptocrats and their relationships here in the U.S.
But, there is still much to worry about as more light is shed on these hiring arrangements. Not only is this a small chipping away at the tip of what is likely an iceberg of FCPA violations, it raises questions about whether the arrangements are influencing hiring practices in America. In one email, a J.P. Morgan executive discussed how to “handle the son in NY and leverage the father in China”. It is not difficult to see the same reasoning being extended here at home but with the father in Capitol Hill or the Treasury. It is a culture and norm that we probably know too little about but which demands more scrutiny.
It is debatable where the line for criminal prosecution lies, but the malpractice across the spectrum does reflect a concerning moral bankruptcy in the highest echelons of our elite institutions and is another disappointing blow to our now increasingly fragile belief in a meritocratic society.