The U.S. Justice Department announced today that Credit Suisse will pay $47 million to resolve a government investigation into the bank’s questionable hiring practices in Asia that may have violated the Foreign Corrupt Practices Act.
Credit Suisse is the latest financial institution to pay a hefty settlement over allegations related to hiring referrals from government agencies or other state-owned entities in exchange for investment banking business opportunities and/or regulatory approvals.
Earlier this year, Credit Suisse announced that it was the subject of an investigation by “certain governmental and regulatory authorities” into its Hong Kong unit’s hiring practices between 2007 and 2013. Specifically, the U.S. Justice Department and the Securities and Exchange Commission investigated whether or not the bank hired employees in Asia in order to secure government contracts or other favors.
According to Bloomberg, Credit Suisse has paid roughly $13 billion in fines since 2008. In a statement, the Zurich-based bank said it has made numerous compliance and control functions since 2013.
For years, the Justice Department and the SEC have been warning companies to proceed with caution when hiring friends or relatives of government officials. Doing so in some circumstances is a violation of the Foreign Corrupt Practices Act (FCPA).
What is the Foreign Corrupt Practices Act (FCPA)?
Before the FCPA was signed into law in 1977, SEC investigations revealed that over 400 American companies admitted to making more than $300 million in corrupt payments and bribes to foreign officials in government and politics. A 1977 report prepared for a House committee on Interstate and Foreign Commerce revealed that many of the largest companies in the U.S., including 117 of Fortune magazine’s top 500 U.S. corporations, made corrupt payments.
Per the committee report, high foreign officials were bribed to curry favor with foreign governments and “facilitating payments” ensured that government functionaries completed certain ministerial or clerical duties.
The FCPA made it unlawful for certain people and entities to make payments to foreign government officials in order to assist in obtaining or retaining business. At first glance, that may not seem applicable to the Credit Suisse case. However, further reading of the FCPA reveals that “payments to foreign government officials” can extend to anything of value that could curry favor with the government official.
The anti-bribery provisions of the FCPA prohibit “anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.”
Hiring the relative or friend of a government official does not constitute a violation of the FCPA in and of itself. However, if the DOJ or SEC discover that the intention of that hiring is an indirect method of providing something of value to a government official, that is a violation of the FCPA.
Credit Suisse FCPA Settlement Not the First…and Certainly Not the Last
Credit Suisse joins numerous other financial institutions to settle allegations related to FCPA violations over the last few years. Below are some of the most notable:
- March 2016 – Qualcomm reached a $7.5 million settlement to resolve FCPA allegations that the company hired relatives of officials working at government-owned telecom companies in China. Qualcomm was also accused of giving employees at government-owned agencies gifts, entertainment tickets, and travel payments.
- November 2016 – JPMorgan Chase paid $264 million in FCPA violation penalties for giving internships and employment to friends and relatives of influential government officials. According to the SEC, JPM hired approximately 100 interns and employees at the request of influential government officials, which enabled the firm to secure business worth over $100 million.
- August 2015 – Bank of New York Mellon settled FCPA charges with the SEC for $14.8 million. According to the SEC, BNY Mellon provided valuable internships to family members of government officials affiliated with a Middle Eastern sovereign wealth fund in order to retain and win the business of servicing the fund’s assets.
Other banks that have recently disclosed possible FCPA violations related to questionable hiring practices in Asia and elsewhere include Barclays, Citigroup, Deutsche Bank, Goldman Sachs and HSBC.
FCPA Whistleblowers Vital in Fight Against Fraud
The fraud alleged in the Credit Suisse FCPA settlement is becoming more and more commonplace, which is why FCPA whistleblowers are so important. If you have firsthand knowledge of dubious hiring practices at a financial institution, we urge you to consider coming forward and exposing the fraud. Doing so not only helps protect the integrity of government institutions, it also sends a clear message to businesses – if you engage in this kind of fraud, you will be investigated and punished.
Furthermore, FCPA whistleblowers who bring information to the government’s attention that leads to a successful enforcement action may be eligible to receive compensation. If you are interested in learning more, please contact the whistleblower attorneys at Baum Hedlund Aristei & Goldman today, or call (855) 948-5098.