Credit Suisse Fined $77 Million Over 'Relationship Hires' in Asia -- Update
July 05 2018 - 9:38PM
Dow Jones News
By Brian Blackstone
ZURICH -- Credit Suisse Group AG has become the latest big bank
to be ensnared by U.S. authorities over the practice of hiring
friends and family of Chinese officials, known as "princelings," to
win business.
The Switzerland-based bank agreed to pay $77 million to settle
charges from the Justice Department and Securities and Exchange
Commission over the use of "relationship hires" between 2007 and
2013 that helped its Hong Kong subsidiary secure business, in
violation of the Foreign Corrupt Practices Act.
The Hong Kong unit "engaged in a corrupt scheme to win business
with Chinese state-owned entities by hiring friends and family of
Chinese government officials, generating the bank at least $46
million in profits," Acting Assistant Attorney General John Cronan
said in a statement Thursday. Credit Suisse agreed to pay $47
million to settle the Justice Department charges.
"These 'relationship hires' often lacked necessary technical
skills, and offered fewer qualifications and significantly less
relevant banking experience than other candidates for the jobs,"
Mr. Cronan said.
The bank had disclosed that settlement in its 2017 annual
report, published last month. It also agreed to cooperate with the
Justice Department in any continuing investigations and to improve
compliance programs.
The SEC settlement, which hadn't been previously disclosed,
totaled $30 million. Credit Suisse had offered to hire more than
100 employees at the request of foreign officials over a seven-year
period, the SEC said.
"No criminal charges were brought, and there is no allegation
that any clients, investors or counterparties were harmed by the
conduct involved in the settlements," a Credit Suisse spokeswoman
said.
In November 2016, JPMorgan Chase & Co. agreed to pay $264
million to settle charges with U.S. authorities over its Asian
hiring practices, which put a spotlight on the practice of hiring
the well-connected children of officials at state-owned firms.
Barclays PLC says it is cooperating with the Justice Department
and SEC over its hiring practices in Asia and elsewhere.
HSBC Holdings PLC in 2016 said it was part of a multibank probe
by the SEC over its hiring practices of candidates with ties to
government officials or state-owned companies in the Asia-Pacific
region.
The Justice Department statement Thursday laid bare some of the
tactics used by Credit Suisse to hire princelings. It cited one
email in which an executive of a state-owned Chinese firm referred
a job candidate to a Credit Suisse banker in Hong Kong. The
executive wrote that hiring the individual would "bring [the Hong
Kong unit] the big surprise in the near future if [the unit]
could...arrange a position in CS team in Beijing."
The Credit Suisse banker in turn emailed colleagues that
"[r]elationship hires have to translate to $" or "the relationship
is worthless to our organization," according to the Justice
Department.
In another email, a Credit Suisse banker warned colleagues to go
easy on a job candidate who was described as "a princess [who was]
not used to too many rounds of interview."
The settlement with U.S. authorities won't have a material
effect on the bank's finances, Credit Suisse said.
--Max Colchester and Margot Patrick contributed to this
article.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
July 05, 2018 22:23 ET (02:23 GMT)
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