Ex-JPMorgan CEO Fang Fang said to have cut deal with prosecutors

Want China Times, Staff Reporter 2014-05-24

JPMorgan Chase's office in Hong Kong. (Photo/CFP)

Former JPMorgan Chase China CEO Fang Fang has reportedly cut a deal with prosecutors and revealed how the investment bank hired the offspring of senior officials in return for favors, reports Shanghai's China Business News.

Fang is said to have decided to cooperate after Hong Kong's Independent Commission Against Corruption pressed charges against him. His move has allegedly prompted many at the bank to hire independent lawyers for their own protection.

The commission and the bank both refused to comment on the development; the commission declined to provide details on when Fang was arrested, on what charge and whether Fang has become an informant. A source familiar with the commission said it can only detain suspects for 48 hours and will only reveal information about cases if it has made a breakthrough.

The bank and seven other international investment banks — Morgan Stanley, Goldman Sachs, Citigroup, UBS, Credit Suisse, Merrill Lynch and Deutsche Bank — have been investigated by the US Securities and Exchange Commission.

Fang retired suddenly on March 24 this year when rumors of an investigation began to spread. Two days after his resignation, a dozen of the commission's officials accompanied him to his office at JPMorgan Chase and took his computer records and documents, China Business News said.

Fang has become a key figure in the US probe into whether the investment bank and its staff violated the Foreign Corrupt Practices Act in the country. He was reportedly arrested by the commission on suspicion of hiring the offspring of senior Chinese officials. Fang was later released on bail and barred from leaving the country.

Fang has not kept a low profile during the investigation and has continued to take part in the activities of Hua Jing Society, the society club he chairs, such as giving a speech at the University of Hong Kong about his experience in investment banking, and visiting a military camp with students.

People close to the former CEO said Fang has mentioned in emails hiring Tang Xiaoning, son of the chairman of the state-owned China Everbright Group, but stressed that the appointment was in line with corporate policy and passed strict reviews of the company's HR and legal departments. The sources also said similar appointments took place from 2002 but no one realized that they might violate regulations or even criminal laws.

Between Tang's term in JPMorgan Chase between August 2010 and March 2012, Everbright International, China Everbright Limited and China Everbright Bank did business with the investment bank. China Everbright Limited raised HK$2.38 billion (US$306 million) through the bank and China International Capital Corporation Limited (CICC)'s Hong Kong branch in August 2012. However, a person familiar with the deal said JPMorgan Chase only received 20% of the commission and the remainder was taken by the Chinese company.

A source familiar with the financial sector said internal documents and emails would provide the key evidence determining whether Tang's appopintment can be linked to illegal profits.