JP Morgan Case Raises Power Abuse Questions in China


2013.11.15
china-jp-morgan-2013.jpg Pedestrians walk by the JPMorgan headquarters in New York, Aug. 14, 2013. U.S. and foreign authorities have escalated probes into whether the bank's hiring practices in China and Hong Kong violated anti-bribery laws.
AFP

Reports that U.S. investment bank JPMorgan paid U.S. $1.8 million to a consulting firm run by the daughter of former Chinese Premier Wen Jiabao are unlikely to raise many eyebrows in China, but they are embarrassing for the leadership amid growing public anger over the huge level of privilege enjoyed by the political elite, analysts said.

Citing documents, public filings and interviews, The New York Times reported on Thursday that JPMorgan had paid out U.S.$75,000 a month to Beijing-based Fullmark Consultants headed by Lily Chang, an alias of Wen's only daughter Wen Ruchun.

Wen, who served as Chinese premier from 2003 to 2013, was in charge of the economy, including major financial institutions, during his time in office.

U.S. officials are currently carrying out a wider probe into the Wall Street bank's hiring practices in the region, which seeks to establish whether the bank traded contracts and jobs in order to win business.

The bank is cooperating with U.S. authorities and has not been accused of wrongdoing, the New York Times said.

Investment banks have traditionally hired people with powerful global connections as consultants, in a bid to win lucrative advisory roles on multibillion-dollar deals like mergers, acquisitions, and initial public offerings (IPOs).

However, U.S. anti-bribery laws forbid their doing so just to win specific contracts.

Not surprised

Chinese analysts said the report is merely another piece in a fragmented picture of how political power and influence intermingle with the financial elite in Beijing and beyond.

"Ordinary Chinese people just see this as another piece of news, and they feel pretty numb," independent Chinese media commentator Jie Mu told RFA's Mandarin Service.

"[This is] because every single Chinese official uses their power, not just for themselves, but also has it used by their family members or offspring, as in the case of Wen Jiabao's daughter," Jie said.

"The only thing that varies is how much ordinary people get to hear about it."

Earlier revelations

Last year, The New York Times revealed details—based largely on publicly available records—of the hidden wealth of China's leaders, including an estimated U.S.$2.7 billion of assets controlled by Wen's relatives.

Chinese Internet censors blocked access to Bloomberg's website in July 2012 following the agency's expose of overseas wealth linked to the family of China's current President Xi Jinping, who launched a high-profile anti-corruption campaign after taking office in March.

Li Xiaobing, director of the Western Pacific Institute at the University of Central Oklahoma, said Thursday's report showed that Xi and Li were highly unlikely to expose the true face of high-level corruption in China.

"The anti-corruption campaign isn't a political goal; it's a tool used in the power struggles of Chinese politics," Li said.

"Its aim is to consolidate the power of the new administration, and to unify the [ruling] Chinese Communist Party under its leadership, in unison."

Exposing corruption

The probe into JPMorgan's hiring practices is being led by the anti-bribery unit of the U.S. Securities and Exchange Commission (SEC), in a bid to decide whether the bank employed people with the express hope of winning specific business, Reuters reported on Thursday.

There is no regulatory barrier to hiring the relative of a foreign official simply because they are well-connected, however.

Jie said if the government wished to prevent such revelations—which are embarrassing to Beijing because of growing public anger over the huge amounts of wealth and privilege enjoyed by those in power—from occurring in future, it should allow much greater press freedom in China.

"Ideally, institutions should oversee each other," he said.

"The only way people will be willing to use their own eyes to keep an eye on things is if there is a free and open media."

A spokeswoman for JPMorgan in Hong Kong told Reuters on Thursday that the bank was "cooperating fully with regulators."

The bank reported in its Nov. 1 quarterly filing that its hiring practices in Hong Kong are also currently under investigation by the U.S. Department of Justice and "other agencies," Reuters said.

Reported by Wen Jian for RFA's Mandarin Service. Translated and written in English by Luisetta Mudie.

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