Aug 29 (Reuters) - U.S. authorities are seeking information from several banks and hedge funds on their hiring practices, focusing on the hiring of relatives of well-connected foreign officials with the intent of winning business, the Wall Street Journal reported, citing people with knowledge of the situation.
The enquiry goes beyond a probe disclosed by JPMorgan Chase earlier this month. The bank has not been accused of wrongdoing. ()
The Journal did not identify which banks and hedge funds have been contacted by U.S. authorities.
U.S. anti-bribery laws prohibit hiring any individual in exchange for a specific favor or benefit from an outside business partner or client.
A spokeswoman for the U.S Attorney in the Eastern District of New York did not immediately respond to a Reuters request for comment outside of regular U.S. business hours.
Since the probe by U.S. authorities, JPMorgan has embarked on an internal investigation that is examining the employment of around 200 people for instances of possible illegal nepotism, a source told Reuters, indicating the bank's hiring issues may extend beyond the two cases U.S. officials originally asked about.
JPMorgan disclosed the inquiry in its quarterly regulatory filing this month.
The bank's chief investment office gambled on credit derivatives, <a href="http://www.huffingtonpost.com/2012/07/13/jpmorgan-chase-q02-earnings-2012_n_1670629.html" target="_hplink">losing $5.8 billion</a> (so far), and its trading desk may have tried to hide the losses from the home office. The bank says it is being sued by shareholders over the losses and has gotten subpoenas and requests for information from "Congress, the OCC, Federal Reserve, DOJ, SEC, CFTC, UK Financial Services Authority, the State of Massachusetts and other government agencies, including in Japan, Singapore and Germany."
Milan Swap Deal
The bank has faced <a href="http://www.bloomberg.com/news/2012-07-18/milan-swaps-prosecutor-seeks-ban-on-4-banks-from-government-work.html" target="_hplink">lawsuits and criminal investigations</a> over an interest-rate swap deal it made with the city of Milan, Italy, back in 2005. The bank settled a civil suit, but criminal charges are still pending against the bank and several employees, with hearings in the trial "occurring on a weekly basis since May 2010."
The bank and some of its executives are still being sued over the bank's relationship with the failed, fraud-ridden energy giant, more than a decade after its failure.
Speaking of Enron, the <a href="http://www.huffingtonpost.com/mark-gongloff/jpmorgan-chase-power-market_b_1647131.html" target="_hplink">Federal Energy Regulatory Commission is investigating</a> charges that JPMorgan manipulated power markets in California and the Midwest.
Credit Card Swipe Fees
The bank said in the filing that <a href="http://www.bloomberg.com/news/2012-08-09/jpmorgan-says-credit-card-swipe-case-cost-1-2-billion.html" target="_hplink">it will pay about $1.2 billion</a> to settle charges that it conspired with MasterCard and Visa to rig credit-card swipe fees.
The bank is being investigated by regulators all over the world for its <a href="http://www.huffingtonpost.com/2012/08/09/jpmorgan-chase-libor-subpoenas_n_1760015.html" target="_hplink">alleged involvement in manipulating Libor</a>, a short-term interest rate that affects borrowing costs for people, businesses and governments all over the world.
Madoff Ponzi Scheme
Several lawsuits have accused the bank of aiding and abetting Bernie Madoff's Ponzi scheme, the biggest in history. The Madoff bankruptcy trustee and others have also sued the bank to get back some Madoff clients' money.
The bank is under investigation by regulators for its <a href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CFEQFjAA&url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fhalahtouryalai%2F2012%2F06%2F04%2Fjpmorgans-other-messy-problem-mf-globals-missing-money%2F&ei=Ui0lUNP7Eqe96QHP94CABA&usg=AFQjCNEJVDksnFTh3KP1uS3u73bLgoSfZQ" target="_hplink">relationship with the failed brokerage firm MF Global</a>. It is also being sued for allegedly aiding and abetting MF Global misuse of customer money.
Mortgage Backed Securities
The bank is being sued by hordes of investors for its bundling and selling of mortgage-backed securities packed with bad mortgage debt before the financial crisis. "There are currently pending and tolled investor claims involving approximately $130 billion of such securities," the bank says.
The bank was part of the big <a href="http://nationalmortgagesettlement.com/" target="_hplink">$25 billion settlement</a> with the government over mortgage-foreclosure abuses. But there are still several lawsuits and regulatory actions pending against the bank over its foreclosure practices.
The bank didn't mention this in its regulatory filing, but it is also involved in the failure of the Iowa brokerage firm Peregrine Financial. JPMorgan <a href="http://www.huffingtonpost.com/2012/07/12/pfg-customer-account-jpmorgan-chase_n_1668386.html" target="_hplink">holds some customer money for the firm</a>, and recently <a href="http://www.foxbusiness.com/news/2012/08/06/jp-morgan-objects-to-terms-proposed-by-peregrine-trustee/" target="_hplink">tussled in court</a> with the PFG bankruptcy trustee.