US banking giant JP Morgan Chase’ association with a small-time consulting firm in China run by the only daughter of former premier Wen Jiabao is being scrutinised by authorities here as part of a wider bribery probe, a media report has said.
“To promote its standing in China,” JP Morgan Chase turned to a “seemingly obscure” consulting firm Fullmark Consultants run by a 32-year-old executive named Lily Chang, a New York Times report said yesterday.
Chang’s firm received a $75,000 dollar contract from the American banking company.
However, Chang’s firm appeared to have only two employees and “on the surface” lacked the influence and public name recognition needed to bring business for the bank.
“But what was known to JP Morgan executives in Hong Kong, and some executives at other major companies, was that ’Lily Chang’ was not her real name. It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who at the time was China’s prime minister, with oversight of the economy and its financial institutions,” the Times report said.
The business relationship pointed to a broader strategy by the bank to accumulate influence in China by putting “relatives of the nation’s ruling elite on the payroll”, the report said.
The US authorities are scrutinising JPMorgan’s ties to Wen as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned Chinese companies, the paper said.
Under the probe, federal authorities are believed to be scrutinising the hiring practices of JP Morgan in India, South Korea and Singapore following an investigation into the bank’s activities in China regarding hiring children of powerful officials to win lucrative business deals.
Clients in Asia-Pacific region
In a filing with Securities and Exchange Commission, the bank had disclosed that the federal regulator and the Justice Department were now looking into “its business relationships with certain related clients in the Asia Pacific region and its engagement of consultants in the Asia Pacific region”, the report said.
While JP Morgan Chase did not specify the countries where the inquiries were directed, an earlier Times report quoted people briefed on the matter as saying that government authorities are examining JP Morgan’s hiring practices throughout Asia, focusing on South Korea, Singapore and India.
JP Morgan reportedly paid Wen’s firm $900,000 annually from 2006 to 2008 for a total of $1.8 million.
“JP Morgan appeared to benefit from the relationship as well. Fullmark claimed in a confidential letter to the bank that it ‘introduced and secured’ business for JP Morgan from the state-run China Railway Group, a construction company that builds railways for the Chinese government,” the report said.
The bank was an underwriter in the company’s 2007 initial public offering, which raised about $5 billion.
However, it is not known whether Wen’s father, Wen Jiabao, played any role in that deal.