8 December 2013
JP Morgan Hired Spoiled Brats of Top CN Officials
December 7, 2013, 1:24 pm
JPMorgan Tracked Business Linked to China Hiring
By BEN PROTESS and JESSICA SILVER-GREENBERG
Tang Shuangning of the China Everbright Group. After his son was hired by
JPMorgan, the banks business with China Everbright and a subsidiary
appeared to pick up.An Tu/European Press Agency Tang Shuangning of the China
Everbright Group. After his son was hired by JPMorgan, the banks business
with China Everbright and a subsidiary appeared to pick up.
Federal authorities have obtained confidential documents that shed new light
on JPMorgan Chases decision to hire the children of Chinas ruling
elite, securing emails that show how the bank linked one prominent hire to
existing and potential business opportunities from a Chinese
The documents, which also include spreadsheets that list the banks
track record for converting hires into business deals, offer
the most detailed account yet of JPMorgans Sons and Daughters
hiring program, which has been at the center of a federal bribery investigation
for months. The spreadsheets and emails recently submitted by JPMorgan
to authorities illuminate how the bank created the program to prevent
questionable hiring practices but ultimately viewed it as a gateway to doing
business with state-owned companies in China, which commonly issue stock
with the help of Wall Street banks.
The hiring practices seemed to have been an open secret at the banks
headquarters in Hong Kong, according to the documents, copies of which were
reviewed by The New York Times. In the email citing the existing and
potential business opportunities, a senior JPMorgan executive in Hong
Kong emphasized that the father of a job candidate was the chairman of the
China Everbright Group, a state-controlled financial conglomerate. The executive
also extolled the broader benefits of the hiring program, telling colleagues
in another email: You all know I have always been a big believer of
the Sons and Daughters program it almost has a linear relationship
with winning assignments to advise Chinese companies. Until now, the indications
of a connection between the hires and business deals have not been so explicit.
In addition to the documents, interviews with current and former JPMorgan
employees suggest that some people inside or affiliated with the bank bristled
at the hiring strategy. At least two whistle-blowers have raised concerns,
with one filing a complaint in April 2011 with the Hong Kong stock exchange
and another coming forward to American authorities this year. Underscoring
the worries, a junior banker in Hong Kong resigned from JPMorgan in December
2011, writing in an email that I do not think my family is in a position
to help you to the extent as others did: bring their family business to the
The scrutiny of JPMorgan, which has not been accused of any wrongdoing, could
provide a template for federal authorities as they expand their investigation
to include the hiring practices of at least five other Wall Street banks
conducting business in China, according to interviews with people briefed
in the inquiry who were not authorized to speak publicly. Those investigations
from the Securities and Exchange Commission, which are at an early stage,
involve Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan
Stanley. All five banks declined to comment.
JPMorgan is cooperating with the government inquiries from the S.E.C. and
the United States attorneys office in Brooklyn, which are examining
whether the bank improperly swapped job offers and consulting contracts for
business with state-owned Chinese companies. Chinas economy is highly
regulated, and many of its biggest companies are state-controlled.
There is no indication that executives at JPMorgans headquarters in
New York were aware of the hiring practices described in the documents. And
authorities might ultimately conclude that the banks hiring, while
aggressive, did not cross a legal line.
JPMorgan declined to comment.
The S.E.C. and the prosecutors in Brooklyn also declined to comment.
The breadth of the investigations underscore how pervasive the hiring practices
may have become in China. For two decades, Wall Street banks have sought
out Chinas so-called princelings, turning family and friends of senior
officials into bank employees and consultants.
The documents reviewed by The Times, along with the interviews, suggest that
some executives at JPMorgan felt a need to scramble to compete with Wall
Street rivals that already had footholds in China. JPMorgan may have adopted
some of their hiring strategies and even shared employees and consultants.
Fullmark Consultants, a firm that JPMorgan hired in 2006 to help improve
its standing in China, also did business with Credit Suisse, according to
interviews. Fullmark, which received a $75,000-a-month contract over two
years from JPMorgan, was run by Wen Ruchun, the only daughter of Wen Jiabao,
who at the time was Chinas prime minister, with ultimate responsibility
over state-owned companies. In the contract with JPMorgan and other clients,
which is now at the center of the federal bribery investigation, Ms. Wen
used the alias Lily Chang.
The S.E.C. and prosecutors are building their investigation around the Foreign
Corrupt Practices Act, a 1977 law that makes it illegal for United States
companies to exchange anything of value with foreign officials
to win an improper advantage in obtaining business. Federal
authorities have adopted a tougher stance in recent years, taking aim at
American companies suspected of acting with corrupt intent, or
with an expectation of trading a job for government business.
It is unclear whether JPMorgan ever reached an upfront agreement with Chinese
government officials. And the records reviewed by The Times do not suggest
that the employees were unqualified. According to documents and interviews
with current and former employees, JPMorgan created the Sons and
Daughters program in 2006 with the expectation that the hires would
receive heightened scrutiny.
But by 2009, the Sons and Daughters program was putting the job
candidates on the fast track to employment. The documents show that applicants
from prominent Chinese families faced less stringent hiring standards
and fewer job interviews than the average junior-level hire.
The bank once proposed another program for full-time referrals
that would have offered the well-connected hires a one-year contract worth
$70,000 to $100,000. The program, internal documents said, might offer
directly attributable linkage to business opportunity.
JPMorgan also briefly kept historical deal conversion spreadsheets,
according to interviews with people briefed on the investigation. In one
column, JPMorgan listed job candidates; in another, the bank recorded its
track record for winning business from companies tied to those
candidates. Other spreadsheets listed well-connected hires and the revenue
JPMorgan earned from deals with private and state-owned Chinese companies
linked to those hires, documents show.
In discussions with authorities, the people briefed on the investigation
said, JPMorgan has explained that it did not connect revenue to the Sons
and Daughters program. Instead, the bank has said, the spreadsheets
were meant to assess whether JPMorgan bankers, in hopes of securing full-time
jobs for some interns in the program, had exaggerated the revenue received
from state-owned companies.
The spreadsheets included about 30 employees with ties to state-owned companies
or Communist Party officials, including the daughter of the deputy minister
of propaganda, a relative of a Chinese financial regulator and the nephew
of the executive chairman at Sinotruk, which is part of a state-owned trucking
JPMorgan also tracked the revenue it received from private Asian companies
that referred job candidates to the bank, a practice that would not fall
under the Foreign Corrupt Practices Act. One hire was connected to Fubon
Financial Holding, a financial services conglomerate in Taiwan that, according
to the spreadsheet, produced 2009 revenue of $900,000 for JPMorgan.
JPMorgan bankers in Hong Kong coveted the business with Fubon. In an August
2010 email reviewed by The Times, a JPMorgan banker in Hong Kong explained
that the bank had picked up a new mandate in Taiwan today, but
that holding onto the deal would depend on securing a job for someone related
to a company executive.
All we have to do, the banker said, is secure the relative a
full-time analyst job at JPM in N.Y.
The problem, another employee in Hong Kong acknowledged, was that the
candidates napping habit will be an eye-opening experience for
our N.Y. colleagues.
While the email appears to suggest a quid pro quo, the message is unlikely
to alarm federal authorities, because it involves a private company rather
than a state-owned enterprise.
But the banks hiring of Tang Xiaoning, a onetime Goldman and Citigroup
employee whose father is the chairman of the China Everbright Group, appeared
to encapsulate the spirit of the Sons and Daughters program for
The father, Tang Shuangning, approached a JPMorgan executive in Hong Kong
in March 2010 about a position for his son, records and interviews show.
The executive, who led JPMorgans China investment banking unit, welcomed
the request and urged his colleagues in an email a day later to discuss
how we can leverage more on this account going forward. But in
an internal compliance form, the executive played down the significance of
hiring Mr. Tang, documents show, saying there was no expected
By that point in March 2010, JPMorgan appeared to do little if any business
with China Everbright, according to securities filings and news reports.
But shortly after Mr. Tangs father approached JPMorgan, a China Everbright
subsidiary hired the bank to advise on a $300 million private offering of
shares, according to interviews. And in 2011, after Mr. Tang worked at JPMorgan
for several months, China Everbrights banking subsidiary hired JPMorgan
as one of several financial advisers on its decision to become a public company,
a deal that was delayed amid turmoil on the worlds markets.
About that time, JPMorgan offered a second one-year contract to Mr. Tang,
who was prevented from having any role in working on China Everbright deals.
Mr. Tang, executives said at the time, had received generally positive
performance reviews. He also had previously earned a masters degree
in international affairs from Columbia University.
While Mr. Tang worked at JPMorgan, the assignments from his fathers
company continued to pile up for the bank. In 2012, China Everbright
International, a subsidiary focused on alternative energy businesses, hired
JPMorgan to advise on a $162 million sale of shares, according to Standard
& Poors Capital IQ, a research service.
In May of that year, as Mr. Tangs contract was expiring, JPMorgan faced
a turning point. But at the urging of the JPMorgan investment banking executive,
Mr. Tang received another extension.
Given where we are on China Everbright, I think we may need another
contract for Xiaoning, the executive wrote.
Zhang Rong, the junior banker who resigned from JPMorgan in December 2011,
also highlighted the banks hiring strategy. On an overnight flight
from Hong Kong to the United States, Mr. Zhang drafted a resignation letter
that lamented how All of my efforts seemed meaningless to you and you
tend to judge me solely on the relation part of me.
Mr. Zhang said he was quitting because he could no longer live under
the shadow of my father. The father, he indicated, had ties to the
China Post Group, which runs the Chinese postal service and other subsidiaries.
In a statement, the China Post Group denied that Zhang Rong was connected
to the company or its top executives. The company declined to provide further
Mr. Zhang promised in the email that his father would still try his
best to coordinate the meeting between JPMorgan and China Post. And
Mr. Zhang, who sent the email just days before Christmas, assured JPMorgan
that he did not harbor any hard feelings.
Wish you and your family merry Xmas and happy New Year!!!
David Barboza contributed reporting.
A version of this article appears in print on 12/08/2013, on page A1 of the
NewYork edition with the headline: Bank Tracked Business Linked To China