Enforcement Action

 

Docket or Case Number:    3-17684

Court:    N/A

Initiation Date:    11/17/2016  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:    N/A

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation , U.S. Attorney’s Office for the Eastern District of New York , Federal Reserve Board of Governors

Type of Action:    SEC Administrative Proceeding

Origin of the Proceeding:    Industry sweep

Whistleblower:    Unknown

Case Status:    Resolved


Summary

JPMorgan Chase & Co. ("JPMorgan"), a Delaware corporation headquartered in New York, was a major banking and financial services firm with operations worldwide. Among the services provided to clients in the Asia-Pacific region were investment banking, private banking, asset management, and commercial banking services. The company’s common stock was registered with the SEC and listed on the New York Stock Exchange.

JPMorgan Securities (Asia Pacific) Ltd. (“JPM APAC ”) was a wholly-owned Hong Kong-based subsidiary of JPMorgan. JPM APAC operated as JPMorgan’s investment banking office in Hong Kong and coordinated JPMorgan’s investment banking operations in the Asia-Pacific region, including in China.

Between 2006 and 2013 investment bankers at JPM APAC created and ran a client referral hiring program which provided “well-paying, career building JPMorgan employment” for the friends and relatives of clients in the Asia Pacific region. These clients included some senior officials at Chinese state-owned and controlled enterprises (“SOEs”). Overwhelmingly, the hires made through the program were otherwise unqualified for positions at JPMorgan and would not have been hired through normal channels. It was understood that these referral hires were made on a quid pro quo basis for lucrative business from JPMorgan’s clients. Over the seven-year period, approximately 200 hires were made under the program, including almost 100 from referrals made by clients at Chinese SOEs, which generated more than $100 million in revenue for JPM APAC.

In an administrative action filed on November 17, 2016, the SEC issued a settled cease and desist order against JPMorgan. Under the terms of the order, JPMorgan was ordered to cease and desist violating the anti-bribery, books & records, and internal controls provisions of the FCPA, to disgorge $105,507,668 plus prejudgment interest of $25,083,737, and to report to the SEC for a term of three years on the status of the enhancement of the company's anti-corruption compliance policies and procedures.

In a related proceeding annouced on November 17, 2016, the DOJ entered into a Non-Prosecution Agreement with JPM APAC with a term of three years. Under the terms of the agreement, JPM APAC agreed to not violate the FCPA, to pay a criminal penalty of $72 million, which was a 25% departure below the bottom of the U.S. Sentencing Guidelines range, and to report to the DOJ for three years on the status of its enhanced compliance policies and procedures.

In addition to the sanctions of $130,591,405 noted above, JPMorgan is also expected to pay $61.9 million to the Federal Reserve Board of Governors.

Country(ies) involved:    China

Sanction to Bribe Ratio:    N/A

Sanction to Revenue Ratio:    $130,591,405 / $100,000,000 = 130.59 %

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    2

Country(ies) involved:    China

Total $ Bribery Payments:    N/A

Total $ Revenue Generated from Bribery:    $100,000,000

Total $ Profit Earned or Expenses Avoided from Bribery:    $35,000,000

Total $ Monetary Sanctions:    $202,591,405

Sanction to Bribe Ratio:    N/A

Sanction to Revenue Ratio:    $202,591,405 / $100,000,000 = (202.59 %)

Sanction to Profit Ratio:    $202,591,405 / $35,000,000 = (578.83 %)

Name:    JPMorgan Chase & Co.

Place of Incorporation:    United States

HQ Country(ies):    United States

Entity Type:    Public Company

FCPA Claims:    Anti-Bribery, Primary, Issuer (15 U.S.C. § 78dd-1) ; Books & Records, Primary, Issuer (15 U.S.C. § 78m (b)(2)(A)) ; Internal Controls, Primary, Issuer (15 U.S.C. § 78m(b)(2)(B))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   2006 - 2013

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    $100,000,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    China

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Officials; Chinese State-Owned Enterprises

Defendant-Related Entities Involved in the Misconduct:    JPMorgan Securities (Asia Pacific) Ltd. - Subsidiary

Third-Party Intermediary:    N/A

Type of Bribe:   Improper Employment

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Improper hires in Asia

Period of Bribery:   2006 – 2013

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    $100,000,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    China

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Chinese State-Owned Enterprises;

Defendant-Related Entities Involved in the Misconduct:    JPMorgan Securities (Asia Pacific) Ltd. - Subsidiary

Third Party Intermediary:    N/A

Type of Bribe:   Improper Employment

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   JPMorgan Chase & Co.

Subsidiary:  JPMorgan Securities (Asia Pacific) Ltd.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: JPMorgan Chase & Co.

  • Inadequate internal controls or auditing

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
JPMorgan Chase & Co.      

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
JPMorgan Chase & Co.    

Total Monetary Sanctions for the Action:    $130,591,405

Case Status:    Resolved


Disposition:    Cease and Desist Order

Date of Disposition:    11/17/2016

JPMorgan Chase & Co.

—  Total Monetary Sanctions for Defendant:    $192,491,405

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Self-reporting

—  Admission of Guilt/Acceptance of Responsibility:    No

    Note: This sanction may have been imposed jointly and severally on multiple defendants, or it may resolve claims against more than one defendant in this proceeding or related proceedings. You should review the case summaries and resolution documents for all related cases to better understand how sanctions were levied against the defendants.

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