Tailspin by Steven Brill

Author:Steven Brill
Language: eng
Format: epub
Publisher: Knopf Doubleday Publishing Group
Published: 2018-05-29T04:00:00+00:00

THE CORPORATE CRIME MOAT

In November 2016, the U.S. Department of Justice announced that JPMorgan Chase had agreed to pay $264.4 million in fines and criminal penalties for violating the Foreign Corrupt Practices Act, which prohibits American companies from bribing officials of a foreign government to get business. According to the settlement agreement, beginning in 2006 the bank’s Asia subsidiary had systematically hired relatives of top Chinese government officials so that the officials, who controlled the process by which major government-owned enterprises launch stock offerings, would steer that lucrative business and other investment deals to the bank.

“The so-called Sons and Daughters Program was nothing more than bribery by another name,” Leslie Caldwell, who ran the Justice Department’s Criminal Division, announced in a press release. “Awarding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple. This case demonstrates the Criminal Division’s commitment to uncovering corruption no matter the form of the scheme.” It might have demonstrated a commitment to uncovering corruption, but holding actual people accountable for the corruption was another matter.

The press release referred to some of those involved as “senior bankers.” An accompanying twenty-one-page statement of the facts, which both sides in the settlement had stipulated to, referred to “executives” and “senior bankers” having “institutionalized the practice of making hires for the purpose of winning business.” A flood of internal emails subpoenaed by the investigators and quoted by the Justice Department in the statement of facts portrayed a practice that was common and, at least at the JPMorgan Asia unit, even a hot topic of office gossip. There was speculation that the “napping habit” of one of the Chinese princelings being transferred to the New York office would be “an eye opening experience for our New York colleagues.” Another’s skill with the office photocopier was described as surpassing anything she knew about investment banking. Promoting the daughter of a prominent official despite what an email called her “undeniable underperformance” was deemed necessary because the “deal is large enough [and] we are pregnant enough with this person, that we’d be crazy not to accommodate her father’s wants.”

Despite the juicy detail, neither the press release nor the supporting document included the name of a single person. Nor was anyone, let alone any of JPMorgan Chase’s senior executives, charged. In fact, the papers referred mainly to the bank’s Asia subsidiary, as if no one at the New York headquarters would have had any way of knowing what was going on in this key profit center, and even though some of the laughably incompetent hires were placed in the New York office.

Since 2010, JPMorgan had settled three other criminal cases by the time the Sons and Daughters deal was announced by paying hundreds of millions of dollars in fines and agreeing to clean up its act. The crimes involved helping to facilitate famed Ponzi-schemer Bernard Madoff’s fraud, rigging bids on municipal bond offerings, and participating in an elaborate multibank conspiracy to defraud clients by fixing rates in a key $500-billion-a-day international exchange rate market.

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