Why Jamie Dimon Is in Hot Water -- Again

An email outlining a Chinese official’s request has put JPMorgan Chase’s hiring practices back in the spotlight.

Feb 10, 2014 at 7:00PM


Source: Scott Akerman.

The probe into JPMorgan Chase's (NYSE:JPM) hiring practices in China appears to be heating up again, with newly revealed information putting CEO Jamie Dimon squarely in the hot seat.

The confidential email was submitted to federal regulators by the bank, and brings the ongoing investigation much closer to home than was previously revealed. The email addresses an in-person request to Dimon from a Chinese insurance regulator, asking that a young family friend be hired to work at JPMorgan's New York headquarters. The applicant, who was acting as an interpreter between Dimon and regulator Xiang Junbo during their 2012 meeting, continued through the selection process before receiving a special internship and subsequently a full-time position, according to The New York Times.

The Times article notes Dimon hasn't been accused of wrongdoing, but the scenario suggests a direct line between the regulator's request and the hiring of the candidate. The email presents language that ties the regulator's ability to procure insurance work for the bank with the candidate's gaining employment at the bank's New York location, noting "the importance of this relationship." 

Other banks under scrutiny
JPMorgan is not the only bank suspected of running afoul of anti-bribery laws when it came to the hiring of the children of high-level Chinese officials. Bank of America, Goldman Sachs (NYSE:GS), and Citigroup are also known to have given jobs to children of the Chinese elite in the past several years. Just recently, Swiss giant UBS (NYSE:UBS) suspended two bankers during an internal investigation of its own hiring procedures in China. The inquiry stemmed from the hiring of the daughter of an influential Chinese industrialist.

For Goldman Sachs' part, CEO Lloyd Blankfein has gone on record as saying that, despite having been approached by Chinese and other foreign officials regarding the hiring of their children, he has no knowledge of employment opportunities being doled out at his bank in exchange for lucrative banking deals.

JPMorgan launched an internal inquiry into its Chinese hiring protocols last summer, after regulators began probing the hiring of the son of China Everbright Group's chair and the daughter of a railway executive. In November, JPMorgan backed away from its underwriting of China Everbright's initial public offering, possibly due to pressure surrounding the regulatory scrutiny.

Fierce competition
Why do banks flout anti-bribery laws in this manner? Some of JPMorgan's emails shed light on that issue. In a 2009 communication turned over to regulators, bank executives complained of losing business to Deutsche Bank "because they got chairman's daughter to work for them." Shortly thereafter, JPMorgan began pushing its "Sons and Daughters" program, which concentrated on hiring the offspring of Chinese officials and tracking how the hiring program created more opportunities for the bank.

JPMorgan insists Dimon did not have a hand in the hiring, despite the fact the request was made directly to him. Perhaps he did not, but the newest crop of emails tends to support the notion that somebody at the Bank of Dimon was handing out jobs in exchange for a leg up on the competition.

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Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Goldman Sachs. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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