Asia Pac, Australia, International - Written by on Monday, August 19, 2013 0:59 - 0 Comments

Confucius say: Hiring relatives of public officials may spark a bribery probe & lavish Olympic hospitality could be frowned on

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AKA: JP Morgan Bribery Probe & Bad News from BHP Billiton

Dog days of summer?

May be.

But the FCPA/bribery story lines continue to drip feed in the media – and China (making headlines earlier this month with GSK) is hogging the limelight.

Hiring relatives in a guanxi environment

On August 7 in its quarterly report JP Morgan disclosed it had received ‘a request from the SEC Division of Enforcement seeking information and documents relating to, among other matters, the Firm’s employment of certain former employees in Hong Kong and its business relationships with certain clients.

No doubt a form of words pored over before its insertion into the filing – a point made by a JP Morgan spokesperson to the New York Times before it went to press over the weekend when they said:

“We publicly disclosed this matter in our 10-Q filing last week, and are fully cooperating with regulators.”

Sadly, if that was intended to spike the story on the basis that the story wasn’t news but in fact 10 days old, it didn’t.

This weekend the New York Times reported (in a racier version than the 10Q) JP Morgan had been hit by a US bribery probe.  The New Times story reported in some detail (check out the link above) that JP Morgan hired the son of a former banking regulator and present Chairman of the China Everbright Group a state controlled Chinese conglomerate and the daughter of a Chinese railway official.

It is claimed JP Morgan won lucrative deals from China Everbright (including a chunky multi billion IPO) and the railway company.

China’s railway – not without problems – has recently been under the microscope with Liu Zhijun the former Minister of Railways receiving a suspended death sentence (yes we did say suspended death sentence – what a nightmare, it sounds like – get caught with a minor prison dress code violation and its curtains) for accepting bribes.

The New York Times reported that the former deputy chief engineer of the railway company (and father of one of the JP Morgan former employees) had previously been detained on suspicion of corruption, citing China’s official state-run news agency though it said it was not clear if that case was still pending. According to the New York Times the S.E.C’s request asked if it “investigated the reported arrest.”

Olympic hospitality problems

The Beijing Olympics were widely acknowledged to be the most lavish ever staged. So much so that when the London Olympics followed in 2012 there was some concern that cash strapped Britain could never follow it.

On Friday BHP Billiton issued this press release:

As previously disclosed BHP Billiton received a request for information in August 2009 from the US Securities and Exchange Commission (SEC). As a result the Group commenced an internal investigation and disclosed to relevant authorities including the U.S. Department of Justice (DOJ) evidence that it uncovered regarding possible violations of applicable anti-corruption laws involving interactions with foreign government officials. As has been publicly reported, the Australian Federal Police has indicated that it has commenced an investigation. The Group is fully cooperating with the relevant authorities as it has since the US investigations commenced.

As a part of the US process, the SEC and DOJ have recently notified the Group of the issues they consider could form the basis of enforcement actions and discussions are continuing. The issues relate primarily to matters in connection with previously terminated exploration and development efforts, as well as hospitality provided as part of the Company’s sponsorship of the 2008 Beijing Olympics. [our emphasis]

In light of the continuing nature of the investigations it is not appropriate at this stage for BHP Billiton to comment further or to predict outcomes. BHP Billiton is fully committed to operating with integrity and the Group’s policies specifically prohibit engaging in unethical conduct. BHP Billiton has what it considers to be a world class anti-corruption compliance program.

The Australian reported in somewhat more colourful terms reporting that BHP Billiton spent tens of million of dollars on Beijing Olympics sponsorship and supplied metal for the games.

Frankly though, so far, so what. Olympic sponsorship costs a *lot* of money and many of those who are sponsors will also supply the games – completely legitimately.

The Australian reported that the hospitality made news back in 2008 with The China Business News reporting in August 2008 that BHP had an “Olympics tour group” with hospitality which included Games tickets, accommodation and concerts with a BHP spokesperson quoted as saying “We watch the Games during the day and socialise at night at hotel bars or places our company has booked,”. Though no doubt great PR at the time, the spokesperson missed off the part about repenting at leisure.

The Australian went on to report that a poll on, a very popular Chinese website, asked at the time whether BHP hosting the high-ranking officials amounted to bribery reportedly over 90 per cent of the well in excess of 20,000 people who responded to the survey said it did.

Not such great PR. Broadly speaking, and as a rule of thumb – if your corporate hospitality program is making headlines – then there may well be something wrong with it.

Reality check


Hiring someone who is the relative of a foreign public official is not illegal and neither is sponsoring the Olympics.

So then, how can you avoid problems?

A clear and transparent hiring process, open to all and a corporate hospitality procedure with thresholds, approval levels, objective and impartial supervisor sign offs supported by underlying documents verifying that the right thing was in fact done would prevent abuse of what otherwise could cause problems.

Obviously the devil is in the detail in these things [we can help] and common sense helps.

In the case of BHP, if the survey results are accurately reported, if over 20,000 people thought that the BHP corporate hospitality was a bit over the top – it’s a shame none of the them worked in the BHP compliance department.

But the real moral of these two stories breaking in the last couple of days is this:

Please make sure your compliance program prevents potential abuses of what should be completely legitimate business activity.

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