JP Morgan Chase has agreed to pay $246m to settle charges brought by the US Government over allegedly corrupt hiring practices in Asia.
Paul Weiss Rifkind Wharton & Garrison, Herbert Smith Freehills (HSF) and King & Wood Mallesons (KWM) were the teams behind the settlement, The Lawyer can reveal.
The probe into the investment bank’s hiring practices in Asia was initiated in 2013 by the Securities and Exchange Commission (SEC).
According to the SEC’s announcement issued on 17 November, JP Morgan will pay more than $130m to settle claims by the SEC alleging that it won business from clients and corruptly influenced government officials in the Asia-Pacific region by giving jobs and internships to their relatives and friends in violation of the Foreign Corrupt Practices Act (FCPA).
Paul Weiss advised JP Morgan throughout the investigation and resolution process as lead counsel. Washington DC based litigation partner Mark Mendelsohn, who is the co-chair of the firm’s FCPA group, was the lead partner. The firm’s core team also included New York partners Brad Karp and Ted Wells, counsel Farrah Berse and Washington DC partner Alex Oh.
HSF is understood to have also assisted the bank throughout the process, advising on Hong Kong-related matters.
KWM also played a role in the probe focusing mostly on PRC issues, although the extent of its involvement in the investigation remains unclear.
Over the last two years KWM has built up its connections with the global bank with several key partner hires.
In April 2015, the firm appointed JP Morgan’s vice chair for Asia Pacific, Zili Shao as co-chair of its China management committee.
In 2014, the firm hired Christine Chen as a partner in Beijing, who was previously a managing director and the legal head of the bank’s North Asia arm.
Following this investigation, the investment bank is also expected to pay $72m to the Justice Department and $61.9 million to the Federal Reserve Board of Governors out of a total of more than $264 million in sanctions resulting from the firm’s referral hiring practices.
The SEC order also revealed that investment bankers at JP Morgan’s subsidiary in Asia created a client referral hiring program that bypassed the firm’s normal hiring process and rewarded job candidates referred by client executives and influential government officials with well-paying, career-building JP Morgan employment.
“JP Morgan engaged in a systematic bribery scheme by hiring children of government officials and other favoured referrals who were typically unqualified for the positions on their own merit,” said Andrew Ceresney, director of the SEC enforcement division.
“JP Morgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative.”
Paul Weiss, HSF and KWM declined to comment on the case.
Several other global financial institutions have been under scrutiny over their hiring practices in Asia in the past a few years. In 2014, Deutsche Bank disclosed that it was under investigation over allegations it hired the relatives of Chinese government officials as a way to win work. Most recently, HSBC said in its 2015 annual report that the US SEC was probing its hiring of candidates in Asia with connections to government officials.
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