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A global bank and its Hong Kong subsidiary reached a settlement with the DOJ and the SEC related to its alleged practice of “awarding employment to friends and family of Chinese officials” to win business. The subsidiary agreed to pay a $47 million criminal penalty as part of a non-prosecution agreement with the DOJ. It also agreed to continue to cooperate in any ongoing investigations. The DOJ noted that the subsidiary had not self-reported the conduct or properly disciplined the employees involved, although it did receive partial credit for cooperating with the investigation once it began.
The parent bank agreed to disgorge nearly $30 million in profits and prejudgment interest in an SEC administrative proceeding. The SEC noted the criminal fine imposed by the DOJ in deciding not to impose a civil penalty.
For prior coverage of the sons and daughters investigations into hiring practices in Asia, please see here.
Global bank settles FCPA allegations concerning “sons and daughters” investigation into hiring practices
On June 6, a global bank announced it had entered into a non-prosecution agreement with the DOJ to resolve an FCPA investigation into hiring practices in the Asia Pacific region between 2007 and 2013. As part of the agreement, the bank agreed to pay a $46 million penalty to the DOJ. According to the bank, it has already provisioned for the penalty and expects the payment to have “no material impact” on its second quarter financial results. The bank further stated that it has implemented multiple enhancements to its compliance and control functions since 2013.
U.S. authorities have investigated several other financial services institutions over their hiring practices in Asia, which have become known as the “sons and daughters” investigations because of the allegations that banks widely hired the children of elite Chinese political families to secure an advantage in obtaining business. Prior Scorecard coverage of those investigations can be found here.
The SEC announced on March 1 that it settled FCPA charges with Qualcomm Inc., the San Diego-based mobile chip maker. Qualcomm agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist Qualcomm in obtaining or retaining business in China. Qualcomm and the SEC settled the case via an Administrative Order Instituting Cease-and-Desist Proceedings, in which Qualcomm did not admit or deny the findings set forth in the order. The order found that Qualcomm had violated the anti-bribery, internal controls, and books-and-records provisions of the FCPA. In addition to the $7.5 million civil penalty, Qualcomm agreed to provide the SEC with self-reports and certifications concerning its FCPA compliance during a two-year period. According to the order, Qualcomm both offered and provided employment and paid internships to family members of Chinese foreign officials in order to try to obtain business. Many of these hires were referred to internally at Qualcomm as "must place" or "special" hires and did not satisfy Qualcomms internal hiring standards. The order also details Qualcomms provision of meals, gifts, travel, and entertainment to both foreign officials and relatives of foreign officials in an effort to influence these officials to use Qualcomm technology. The settlement appears to be an extension of the SEC's "Sons and Daughters" investigations which, up until now, have been focused on the hiring practices of financial institutions in the Asia Pacific. As previously reported by the Wall Street Journal, in March 2014, the SEC sent letters to at least five U.S. and European banks, including Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., and UBS AG, seeking more information about their hiring practices in Asia and to examine whether the banks violated the FCPAs anti-bribery provisions by hiring relatives of well-connected government officials. Prior FCPA Scorecard coverage of other aspects of the "Sons and Daughters" investigations around the world is available here.
On March 1, a large international bank based in the U.K. disclosed in its annual report that it is being investigated in connection with its hiring practices in Asia. In disclosing both DOJ and SEC investigations, the bank noted that it is cooperating with the investigations and "keeping certain regulators in other jurisdictions informed." While not explicitly linking the hiring probe to the FCPA, the acknowledgement appears to be the latest by an international financial institution concerning U.S. investigations into FCPA implications of its hiring practices in Asia and continues the long-running "Sons and Daughters" investigations by the SEC. Prior FCPA Scorecard coverage of other aspects of the "Sons and Daughters" investigation around the world is available here. Separately in its annual report, the U.K.-based financial institution also stated that the "DOJ and SEC are undertaking an investigation into whether the [bank's] relationships with third parties who assist [the bank] to win or retain business are compliant with the" FCPA. The bank disclosed that it has briefed regulators in other jurisdictions about these investigations.
A large international bank on Monday became the latest bank to disclose requests for information from the SEC related to the long-running "Sons and Daughters" investigation into the hiring of "candidates referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific." The bank noted that it "is cooperating with the SECs investigation." Prior FCPA Scorecard coverage of other aspects of the "Sons and Daughters" investigation around the world is available here.
Bank of New York Mellon Receives Wells Notice from SEC Regarding Hiring Practices and Possible FCPA Violations
Bank of New York Mellon Corp. ("BNY") said in a January 23, 2015 securities filing that it had received a Wells Notice from the SEC indicating that the SEC had preliminarily determined to recommend an enforcement action against the bank for possible FCPA violations. Certain current and former employees had received a Wells Notice in the third quarter of 2014 and the bank itself received a Wells Notice in the fourth quarter. The SEC's inquiry focuses on BNY's provision of internships to relatives of sovereign wealth fund officials. While the details of the SEC's allegations against BNY are not known, the SEC's investigation has been ongoing since at least 2011, and follows other efforts by the agency to investigate large banks' hiring practices overseas. As previously reported by the Wall Street Journal, in March 2014, the SEC sent letters to at least five U.S. and European banks, including Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., and UBS AG, seeking more information about their hiring practices in Asia and to examine whether the banks violated the FCPA's anti-bribery provisions by hiring relatives of well-connected government officials.
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