UPDATE 2-US probe of JPMorgan China hiring involves ex-premier's daughter -NYT

Thu Nov 14, 2013 12:04pm EST

NEW YORK/HONG KONG Nov 14 (Reuters) - JPMorgan Chase & Co paid $1.8 million over two years to a small consulting firm run by the daughter of former Chinese Premier Wen Jiabao, The New York Times reported on Thursday, a relationship that is part of a wider U.S. probe into the Wall Street bank's hiring practices in the region.

Citing documents, public filings and interviews, the newspaper said JPMorgan had a $75,000 a month contract with the consulting firm run by Lily Chang, which appeared to have only one other employee. The paper said Chang is the alias of Wen Ruchun, the only daughter of Wen Jiabao, who as premier had oversight of financial institutions at the time of the contract.

U.S. authorities are investigating whether JPMorgan improperly gave jobs to well connected people in Asia to win business. The probe has spurred several JPMorgan executives to hire lawyers in the United States, a source told Reuters on Wednesday.

Banks globally have a long history of hiring people whose connections can be professionally useful. Investment banks in China often hired well-connected people starting in the early-2000s, when the firms were looking to underwrite stock offerings for the country's big state-owned enterprises, a practice known as "elephant hunting."

If a bank hires unqualified applicants to help win business from the employees' relatives it may be construed as a bribe under the U.S. Foreign Corrupt Practices Act.

JPMorgan is now reviewing all of its Asia hires and deals to see whether any deals the bank landed can be directly linked to "Sons and Daughters" hires. So far no smoking gun has been found and the bank's internal investigation is continuing, the source said. The New York Times reported that the U.S. government's investigation could take years.

Two people familiar with the matter said the government's investigation was focusing on how the bank hired politically connected people for its two-year analyst program, which trains junior employees.

About seven years ago, JPMorgan decided to limit the number of "connected employees" in its analyst program to about a dozen, the sources said. Top JPMorgan managers created a spreadsheet to keep track of bankers assigned to mentor the connected employees, and which deals those mentors were working on.

The goal was to prevent the mentors from working on deals directly related to their mentees' families, said the sources, who requested anonymity because they were not authorized to speak for the bank on the matter.

The U.S. Securities and Exchange Commission's anti-bribery unit is leading the government's JPMorgan probe, a person familiar with the matter previously told Reuters. The Department of Justice is also involved, as are authorities in other jurisdictions, the bank said in a November regulatory filing.

In August, The New York Times reported two of JPMorgan's hires under investigation were the son of the head of a Chinese state-run financial conglomerate, and the daughter of a former railway official.

A spokeswoman for JPMorgan in Hong Kong said on Thursday that the bank was "cooperating fully with regulators". She declined to comment further and referred to the bank's Nov. 1 quarterly regulatory filing.

EVERBRIGHT, RAILWAY

JPMorgan at one point hired Tang Xiaoning, the son of Tang Shuangning, chairman of state-controlled financial conglomerate China Everbright Group, and a former banking regulator, The New York Times reported in August.

After the younger Tang joined JPMorgan, the bank won several important assignments from Everbright, including advising a subsidiary on a stock offering, the newspaper reported.

The SEC is also probing JPMorgan's hiring of Zhang Xixi, the daughter of a now-disgraced Chinese railway official. The bank went on to help advise the official's company, which builds railways for the government, on its plans to go public, The New York Times reported in its August article.

According to the newspaper's latest article, there is no indication from documents seen by The New York Times that Wen brokered any deals or investments between JPMorgan and companies affiliated with her family.

Reuters could not immediately reach Wen Ruchun for comment. A visit to the Beijing office cited by The New York Times as Fullmark's headquarters revealed no company of that name, suggesting the business has either closed or moved.

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