Monday, August 19, 2013

Banking’s Blood Relationships

Family album as resume.

As reported in this New York times article, JP Morgan is being investigated by the US SEC’s anti-bribery laws in relation to its practice of hiring the offspring of senior Chinese government officials into their Hong Kong office in order to improve their ties to Chinese clients and win business. Focus in the article and investigation relate to the daughter of an official of the China Railway Group and the son of the chairman of the China Everbright Group. JP Morgan has garnered a good share of lucrative business from these entities over the past several years.
It’s interesting that the investigation is coming to light now, even though the practice of hiring “princelings” and other relatives of powerful political and business leaders in China and other countries is a well-trodden path to winning deals. Almost every major bank over the past decade has augmented the ranks of their professionals with the well-connected. Furthermore, it remains to be seen whether the US government can prove that such hiring practices violates bribery and corruption acts. A key legal question is how “qualified” the hired person is to perform the task for which (s)he is being remunerated, and whether it is reasonable to think that a person with a particular professional background is capable of winning big deals other than through unethical or illegal means.
In any event, similar with the Bo Xilai case, there could be some interesting investigations and media reporting yet to come. This topic is also a key theme in this reporter’s forthcoming second novel, a prequel to Nothing Gained. Stay tuned...

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