Welcome Back My Friends To The Show That Never Ends

by Thomas Fox
Contact

Welcome back my friends, to the show that never end;

We’re so glad you could attend, come inside, come inside;

There behind the glass stands a real blade of grass;

Be careful as you pass, move along, move along. 

Those lines come from the Emerson, Lake & Palmer (ELP) song, Karn Evil No. 9: First Impression, Part 2. I was introduced to the progressive rock trio, through the album Welcome Back, My Friends, to the Show That Never Ends…Ladies and Gentlemen, Emerson, Lake & Palmer, which was released on this date 39 years ago. I still think that this is the greatest live 3 disc album release by a single group ever. To say that the album blew me away would be an understatement. I was not exposed to too much prog rock in my podunk little hometown and even the signals of decent FM radio stations were fleeting, so this album was a revelation. I had been a rocker for some time but the musicianship of Keith Emerson, Greg Lake and Carl Palmer was simply unbelievable. For me the centerpiece was the epic three song trilogy of Karn Evil No. 9. So here’s to you lads, and I hope that you will do a full US reunion tour one day.

“Welcome back my friends” would certainly seem to be an excellent way to introduce today’s topic; that being the stunning report in the Sunday New York Times (NYT), that JP Morgan is under Foreign Corrupt Practices Act (FCPA) scrutiny in China for its hiring practices. In an article, entitled “Hiring in China By JPMorgan Under Scrutiny”, reporters Jessica Silver-Greenberg, Ben Protess and David Barboza broke the story that the Securities and Exchange Commission (SEC) is investigating JP Morgan Chase to determine “whether JPMorgan Chase hired the children of powerful Chinese officials to help the bank win lucrative business in the booming nation.” The article is based upon “a confidential United States government document”.

The article details several situations where JPMorgan hired the children of Chinese government officials and sometime thereafter the bank was able to secure work from the business or industry of a parent of a hired employee. The examples included the hiring of a “son of a former Chinese banking regulator who is now the chairman of the China Everbright Group, a state-controlled financial conglomerate, according to the document, which was reviewed by The New York Times, as well as public records. After the chairman’s son came on board, JPMorgan secured multiple coveted assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, records show.” In another instance, the bank hired the daughter of a Chinese railway official. After hiring the daughter, JP Morgan was hired to assist the company to go public.

The FCPA Professor was quoted in the NYT article for the following, “While the hire of a son or daughter itself is not illegal, red flags would be raised if the person hired was not qualified for the position, or, for example, if a firm never received business before and then lo and behold, the hire brought in business.” In blog post, entitled “JPMorgan’s Hiring Practices In China Under Scrutiny”, the FCPA Professor reviewed some enforcement actions “where the conduct at issue involved the hiring of children or spouses of alleged “foreign officials.”” He pointed to the “Tyson Foods enforcement action, part of the FCPA conspiracy alleged was “to place the wives of the [Mexican government] veterinarians on [a subsidiary company's] payroll, providing them with a salary and benefits, knowing that the wives did not actually perform any services…”. According to the Department of Justice (DOJ), approximately $260,000 “in improper payments were made to the … veterinarians, both indirectly and directly, including through payments to wives of [the] veterinarians.” Next, in the UTStarcom enforcement action, the FCPA Professor noted that the “SEC’s allegations included that the company provided foreign government customers or their family members with work visas and purportedly hired them to work for [the company] in the U.S., when in reality they did no work for the company.” Finally, the Houston-based company Paradigm, got into FCPA hot water “during the same time frame as [a business deal was being discussed with an alleged Mexican "foreign official"], the same [alleged "foreign official"] requested that Paradigm Mexico hire his brother.” The DOJ stated: “Paradigm Mexico acquiesced to that demand and hired the decision maker’s brother as a driver. While employed at Paradigm Mexico, the brother did perform some work as a driver.”

The NYT notes that “there is nothing inherently illicit about hiring well-connected people. To run afoul of the law, a company must act with “corrupt” intent, or with the expectation of offering a job in exchange for government business.” However a company needs to be very careful when hiring such a family member. Indeed, I advise clients that the following definition should be used for a government official”

A “Foreign Official” for purposes of the FCPA and UK Bribery Act mean any:

  • non-U.S. government official (includes municipal, provincial, central, federal or any other level of government);
  • officer or employee of a foreign government, or any department, agency, ministry or instrumentality thereof (includes executive, legislative, judicial or regulatory);
  • person acting in an official capacity on behalf of a foreign government or any department, agency, ministry or instrumentality thereof;
  • officer or employee of a company or business owned or controlled in whole or in part by a foreign (non-U.S.) government (“state owned enterprise”);
  • officer or employee of a public international organization such as the United Nations or World Bank;
  • member of a royal family;
  • foreign political party, member, or official thereof;
  • candidate for foreign political office; and
  • elected officials of foreign countries, civil servants and military personnel.

The term also includes the children, spouse or other close relatives of Foreign Officials. If a child, spouse or other close relative is hired there should be close scrutiny of how the request for the hire was made, who made the request and what are the qualifications of the child, spouse or other close relative for the job in question? There should also be a close look at the work of the proposed candidate to ascertain if anything they might do for the prospective employer would in any way touch upon the business relationship with the government official.

JP Morgan has come under quite a bit of regulatory scrutiny lately. The NYT notes that is the “focus of investigations in the United States by at least eight federal agencies, a state regulator and two foreign nations.” Most of these investigations revolve around the financial crisis and its aftermath or the London Whale incident. Even if one discount’s the ‘too big to manage’ moniker, the NYT does note that a FCPA investigation and any enforcement action can be quite different. “The agency’s bribery inquiry could pose an even steeper challenge to JPMorgan. Although banks are prone to the occasional trading blunder — JPMorgan produced record quarterly profits despite the losses in London last year — a corruption inquiry could leave a more lasting mark on its reputation. It might also spur the Justice Department to open a criminal investigation.”

So after the GlaxoSmithKline PLC (GSK) bribery and corruption investigation has quieted down and settled in for the long haul, the NYT breaks this story about yet another avenue for potential corruption in China. As ELP might say “Welcome back my friends, to the show that never ends.”

For a video clip of ELP playing Karn Evil No. 9, First Impression, Pt. 2 at the 1974 California Jam, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

Written by:

Thomas Fox
Contact
more
less

Compliance Evangelist on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.