U.S. regulators have expanded their investigation into major banks' hiring practices in Asia, seeking more information from at least five U.S. and European firms, people close to the probe tell The Wall Street Journal.
The Securities and Exchange Commission in early March sent letters to a group of companies including Credit Suisse Group AG (NYSE:CS), Goldman Sachs Group Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup Inc. (NYSE:C) and UBS AG (NYSE:UBS), seeking more information about their hiring in Asia, say the Journal’s sources. It is examining whether the banks or their employees violated bribery laws by hiring relatives of well-connected officials or executives.
The move marks a ratcheting up of an investigation that started last year with a query into J.P. Morgan Chase & Co.’s (NYSE:JPM) hiring practices abroad. The largest U.S. commercial bank by assets remains the focus of criminal and civil probes by the SEC and federal prosecutors, these people say.
None of the banks involved has been accused of wrongdoing.
The SEC is probing potential breaches of the Foreign Corrupt Practices Act, which forbids U.S. companies to give money or other items of value to foreign officials to win business.
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The probe has rattled bankers in Asia, in some cases causing firms to walk away from deals that could come under scrutiny from U.S. investigators, people familiar with the matter tell the Journal.
The SEC late last year issued letters to at least six banks, seeking information on their hiring practices, such as whether they had special programs dedicated to relatives of influential officials, according to people close to the inquiry.
The second round of requests reflects a deepening of the probe.
The agency is seeking more data on the banks' recruiting in Asia, including lists of employees hired as a result of referrals from foreign officials and clients, added the people familiar with the investigation.
U.S. anti-bribery laws give the SEC the power to take civil enforcement action against U.S. firms, or any other company with securities listed in the U.S. The enforcement agencies often bring actions based on alleged misconduct by firms' employees or agents from around in the world. The laws ban the payment of bribes designed to win or retain business to foreign officials — a category that extends to employees of state-owned entities.
It isn't against U.S. law to hire family members of government officials, as global investment banks and other companies long have done in Asia.
But investigators are hunting for evidence that links the recruitment of an unsuitable employee to the bank's winning a contract or other new business, said the people close to the probes. Such a quid pro quo could violate the U.S. law, according to legal experts. There are examples of previous enforcement actions that involve the hiring of relatives of foreign officials.
Many of the banks under SEC scrutiny have hired children of current or former political officials, though it isn't clear whether those particular hires are under scrutiny.
The SEC's information requests are causing concern among the banks, where officials worry that releasing certain information on individuals sought by the regulator could breach local privacy laws in China, said a person familiar with the probe.