Newspaper article International New York Times

JPMorgan Pulls out of Share Sale by Chinese Firm ; Bank Is Subject of Inquiry for Hiring the Children of Government Officials

Newspaper article International New York Times

JPMorgan Pulls out of Share Sale by Chinese Firm ; Bank Is Subject of Inquiry for Hiring the Children of Government Officials

Article excerpt

As the United States steps up an investigation into hiring practices in China, the bank abandoned its role in Tianhe Chemicals Group's potential $1 billion I.P.O.

JPMorgan has removed itself from a potential $1 billion share sale by a Chinese chemical company as the United States steps up an investigation into hiring practices in China by it and other Wall Street banks, people with direct knowledge of the matter said Tuesday.

JPMorgan previously employed the daughter of the chairman of the privately held Chinese company, Tianhe Chemicals Group, as a junior banker in Hong Kong, and it has recently bowed out as a potential underwriter of the company's planned initial public offering in Hong Kong, the people said, declining to be named because of the sensitivity of the matter.

It is at least the second I.P.O. for a Chinese company from which the bank has disassociated itself since The New York Times disclosed the United States investigation in August. The Securities and Exchange Commission and federal prosecutors in Brooklyn have been investigating whether JPMorgan's "Sons and Daughters" program of hiring the children of executives at state-owned Chinese companies was directly linked to winning business. Six other banks have also come under scrutiny over their hiring practices. Neither JPMorgan nor any of the other banks have been accused of wrongdoing.

In November, JPMorgan withdrew as one of the underwriters of the state-owned China Everbright Bank's share sale. JPMorgan had previously employed the son of Tang Shuangning, China Everbright Group's chairman, a relationship that United States investigators have been examining. Everbright Bank went on to raise $3 billion in December, the biggest I.P.O. in Hong Kong of 2013.

Two of the people briefed on the matter said that the decision to remove itself from a role on Tianhe's planned I.P.O. was made on JPMorgan's own initiative. "This really starts and stops at JPMorgan's compliance department in New York battening down the hatches under all this regulatory scrutiny," one of the people briefed on the Tianhe deal said. …

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