Hiring Children of Foreign Officials May Expose Bank to Bribery Charges
Provided by HG.org
America's largest banking institution is facing charges under the Foreign Corrupt Practices Act for a practice of hiring the children of foreign officials. The case will test how broadly the federal law can be applied to practices as common as hiring an influential person's children in order to gain a small advantage in negotiations.
According to Bloomberg, an internal spreadsheet connected certain hires to deals being pursued by the bank. As a result, questions have been raised about whether there were any explicit benefits provided in exchange for receiving business.
JPMorgan has not yet been accused of any violations, and the bank is reportedly cooperating in the federal government's investigation. It is, of course, no surprise that those with powerful connections often have an inside track to coveted jobs, whether those people are the children of foreign officials or simply well-connected US citizens. But, the Foreign Corrupt Practices Act focuses on bribery of overseas officials. If the federal government finds that JPMorgan agreed to hire someone’s child in exchange for getting business from a government-controlled entity, it may have run afoul of this law and could face criminal charges. For instance, a 2011 case against Tyson Foods involved seeking favor from Mexican government officials by hiring their wives for no-show jobs, a clear violation of the law.
In JPMorgan's defense, an argument could be raised that a job could be given to an official's child in order to obtain a favorable view of the company, but if that person actually does credible work then the hiring may not be entirely an act of bribery. But, the Foreign Corrupt Practices Act is flexible, and even hiring an otherwise qualified employee who also just happens to be the offspring of a state official could be enough to violate the statute.
The statute requires proof that the defendant acted “corruptly,” which is obviously a very vague standard. In the case of Arthur Andersen LLP v. United States, the US Supreme Court described the “corruptly” standard as “normally associated with wrongful, immoral, depraved, or evil.” Although one or two questionable hires might not prove an intent that was “wrongful” or “evil,” a pattern of hiring could be enough to meet this standard.
Using corporate resources to buy favor from public officials is certainly not unknown, even in this country. The now defunct Countrywide Financial had a program called Friends of Angelo, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to some members of Congress and their staff. Surprisingly (or not) criminal charges were never filed.
In JPMorgan's advantage is the fact that investigations of this matter will likely drag on at length because the government depends on the company being investigated to undertake an internal investigation and identify potential violations, later disclosing the results to the government. Nevertheless, the timing could not be much worse for the embattled bank which is simultaneously struggling to resolve investigations over its mortgage-backed securities sales and losses from the “London Whale” trades. This violation of the Foreign Corrupt Practices Act will likely add millions to the bank's investigative costs and potential fines to the US federal government.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
JPMorgan has not yet been accused of any violations, and the bank is reportedly cooperating in the federal government's investigation. It is, of course, no surprise that those with powerful connections often have an inside track to coveted jobs, whether those people are the children of foreign officials or simply well-connected US citizens. But, the Foreign Corrupt Practices Act focuses on bribery of overseas officials. If the federal government finds that JPMorgan agreed to hire someone’s child in exchange for getting business from a government-controlled entity, it may have run afoul of this law and could face criminal charges. For instance, a 2011 case against Tyson Foods involved seeking favor from Mexican government officials by hiring their wives for no-show jobs, a clear violation of the law.
In JPMorgan's defense, an argument could be raised that a job could be given to an official's child in order to obtain a favorable view of the company, but if that person actually does credible work then the hiring may not be entirely an act of bribery. But, the Foreign Corrupt Practices Act is flexible, and even hiring an otherwise qualified employee who also just happens to be the offspring of a state official could be enough to violate the statute.
The statute requires proof that the defendant acted “corruptly,” which is obviously a very vague standard. In the case of Arthur Andersen LLP v. United States, the US Supreme Court described the “corruptly” standard as “normally associated with wrongful, immoral, depraved, or evil.” Although one or two questionable hires might not prove an intent that was “wrongful” or “evil,” a pattern of hiring could be enough to meet this standard.
Using corporate resources to buy favor from public officials is certainly not unknown, even in this country. The now defunct Countrywide Financial had a program called Friends of Angelo, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to some members of Congress and their staff. Surprisingly (or not) criminal charges were never filed.
In JPMorgan's advantage is the fact that investigations of this matter will likely drag on at length because the government depends on the company being investigated to undertake an internal investigation and identify potential violations, later disclosing the results to the government. Nevertheless, the timing could not be much worse for the embattled bank which is simultaneously struggling to resolve investigations over its mortgage-backed securities sales and losses from the “London Whale” trades. This violation of the Foreign Corrupt Practices Act will likely add millions to the bank's investigative costs and potential fines to the US federal government.
Copyright HG.org - Google+
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
