JPMorgan Chase settles FCPA case for $264 million, nonprosecution

On Thursday the Justice Department, the SEC and the Fed jointly agreed to allow JPMorgan Chase to settle a case involving allegedly massive bribery of Chinese officials. The settlement will require the bank to pay penalties totaling $264 million but not to admit any wrongdoing. While critics including President-elect Trump called for executives to be charged criminally, the bank was able to achieve a nonprosecution agreement, which is unusual.

The Foreign Corrupt Practices Act of 1977 was passed to prohibit American businesspeople from engaging in bribery or other corrupt practices when operating abroad. The case against JPMorgan Chase originated from an investigation the SEC initiated in 2013.

Indeed, in the announcement on Thursday, the SEC’s head of enforcement added that “We do not expect this to be the last action resulting from that sweep” and, indeed, Goldman Sachs, HSBC and Deutsche Bank hinted to the New York Times that they have also been under investigation for their hiring practices in China.

JPMorgan Chase was accused of hiring the children of Chinese government leaders, even though many were completely unqualified for their positions, in order to secure lucrative contracts. While some amount of nepotistic hiring is customary in China, prosecutors alleged that JPMorgan explicitly tied such hires to the acquisition of specific business opportunities.

“The common refrain that this is simply how business is done overseas is no defense,” said the United States attorney in Brooklyn, one of the leaders of the criminal investigation. “This is no longer business as usual; it is corruption.”

According to the New York Times’s DealBook, JPMorgan achieved the unusual nonprosecution agreement in part because of its extensive cooperation with the investigation but mostly, perhaps, due to the bank having made big changes in response to the allegations. It immediately ended the hiring program in China and disciplined almost two dozen employees, six of whom left the bank. It also made some policy changes to prevent the use of bribery in hiring and reinforced its expectations of high standards of conduct — which includes full compliance with the FCPA.