Wall Street Bribery Battle Has Global Implications


Right now, a drama is playing out in the U.S. that could affect companies all over the world. As reported in media outlets including the Wall Street Journal, some U.S. banks are challenging the government on what they call its “aggressive” interpretation of anti-bribery laws. The cases in question include allegations that jobs were created for relatives of well-placed officials in China and other countries in return for favorable business deals.

At its heart, the showdown revolves over what the banks say is unfair persecution in a global landscape that has different “rules” for different locations. In other words, what is clearly bribery and corruption in one locale may be “normal business practice” in another. JP Morgan Chase is front and center in this case of pushback, as it is one of the banks currently under allegations of corruption based on hiring practices in Asia. As reported in the Wall Street Journal:

J.P. Morgan Chase & Co., under investigation over its hires in Asia, is preparing a white paper to submit to the Securities and Exchange Commission and Justice Department, setting out the bank’s concerns about their approach, the people said. Other banks under scrutiny have separately urged officials to change their position, the people said.

The probe into J.P. Morgan’s practices is one of the furthest along, people familiar with it said, with scrutinized hires including Gao Jue, the son of China’s commerce minister, whose hiring was supported by then-banker and subsequent White House Chief of Staff William M. Daley, the Journal has previously reported.

It’s About the FCPA: JP Morgan Chase’s favored hiring practices in China even had a name, the “sons and daughters program.” It has since been shut down. But JP Morgan Chase and other banks are arguing that the interpretation of the Foreign Corrupt Practices Act (FCPA) that the government is applying is faulty. To some degree, the disagreement is in the letter of the law: whether well-connected relatives of officials are being hired solely to secure a business deal; or if they are simply highly qualified, albeit well-connected, hires who are not linked to one specific deal.

It seems a fight that the banks are unlikely to win. While the WSJ article seems somewhat slanted in their favor (quoting a law professor, for example, who opines that the government is “pushing the envelope” with its investigations), the fact is that measures like the FCPA, UK Bribery Act and other laws are aimed at leveling the playing field in the international arena. Those intent on preventing corruption are not keen on making allowance based on the old arguments that “this is just the way they do business here.”

That is among the perceptions that lawmakers, armed by reports from Transparency International and other think tanks, are trying to change. What is unethical in the U.S. is unethical in China, and vice versa. Where the law meets is still a long way from the middle, but U.S. companies would be best suited to fall in line within the FCPA rather than take their chances outside of it.

Depend on Experts, Not Luck: This is a perfect example of why companies doing international business need experts on their side to ensure they are within the bounds of the law, both within their own principality, and within the countries where they wish to do business. Investigations under the FCPA and UK Bribery Act are increasing, not to mention the crackdown within China and other companies that are working to change their image on the international stage. CRI Group’s experts are staying educated on the changing corruption and fraud laws in all corners of the globe, helping our clients navigate complicated waters and conduct business legally. It is the only smart way to do business, as those companies being investigated today would surely attest.