Forming opinions in the absence of facts is a dangerous business, which is why it’s premature to draw conclusions about whether the US government is on the right track with its investigation of JPMorgan Chase’s hiring practices in China.
That said, if the feds are going to make a case, they will need a lot more evidence on the bank than what the New York Times offered on Friday in its latest article on the subject. Maybe they will find it.
The article relies on information from people whom the Times did not identify. So it is hard to tell whose version of events we are getting. The article refers to a “confidential government document” as a key source, although it obviously is not confidential because the Times said the document was sent to JPMorgan.
The bank is under investigation by the Securities and Exchange Commission and the Justice Department for possible violations of the Foreign Corrupt Practices Act, which bans companies from bribing foreign officials to win business. In short, JPMorgan hired a lot of powerful people’s kids in China. The bank even had a name for this – the “Sons and Daughters” programme.
The Times said the programme started in 2006, citing interviews with former bank employees. “Friends and family of China’s ruling elite were clamouring for jobs at the bank,” the article said. The programme supposedly started as a way to ensure that JPMorgan didn’t improperly hire the children of Chinese officials to land business. It wound up fostering questionable hiring practices rather than preventing them, said the Times, which cited the Securities and Exchange Commission letter and interviews with former bank employees.
“It is unclear why and when the programme shifted from a safeguard into a liability,” the article said. “But the results were clear: children with elite pedigrees faced lower standards.”
Imagine that. As an example, the Times cited the 2010 hiring of Tang Xiaoning, the son of the chairman of China Everbright Group, a state-controlled financial conglomerate that later hired JPMorgan as a financial adviser. “According to the interviews, an internal JPMorgan investigation into its hiring practices across the globe has identified more than 250 well-connected hires in Asia alone. That included the sons and daughters of private Chinese companies, a hiring practice that would not violate US law but could cause regulatory problems overseas.”
Here’s where I start to wonder. The government may have dug up information that is worse than anything described in the article. Still, barring definitive evidence that shows JPMorgan intentionally hiring people’s kids as a form of bribery, it’s hard to tell where this probe is heading.
In the US, companies hire powerful people’s children all the time for reasons beyond their obvious skill set. (Chelsea Clinton working at a hedge fund?) And they don’t just bother with kids – they hire the powerful people too. (Did Larry Summers get a high-paying job at the hedge fund DE Shaw because of his skills as a trader?)
If the feds are going to target wheel-greasing in China – where it can be difficult to get business done without bribing somebody – does this mean we need a Domestic Corrupt Practices Act, too?
When owners of companies hire senators’ kids for internships, they probably would like to meet the parents some day.
Perhaps what JPMorgan did in China was worse. We don’t know yet. But let’s not get ahead of ourselves. The decision whether to hire someone often has less to do with qualifications than it does with who they are. Life isn’t fair – not in the US and not in China.
Jonathan Weil is a Bloomberg columnist.