The Securities and Exchange Commission has announced that Credit Suisse Group AG will pay approximately $30 million to resolve allegations that it obtained investment banking business in the Asia-Pacific region by corruptly influencing foreign officials in violation of the Foreign Corrupt Practices Act.
The allegations center on Credit Suisse (Hong Kong) Limited (CSHK), a Hong Kong-based subsidiary of Credit Suisse Group AG, a Swiss-based issuer of publicly traded securities in the United States. Credit Suisse also agreed to pay a $47 million criminal penalty to the U.S. Department of Justice for “a scheme to corruptly win banking business by awarding employment to friends and family of Chinese officials.”
According to the SEC’s order, several senior Credit Suisse managers in the Asia-Pacific region sought to win business by hiring and promoting individuals connected to government officials as part of a quid pro quo arrangement. While the practice of hiring client referrals bypassed the firm’s normal hiring process, employees in other Credit Suisse subsidiaries and affiliates were aware of it and in some instances approved these “relationship hires” or “referral hires.”
The SEC’s order found that in a six-year period, Credit Suisse offered to hire more than 100 individuals referred by or connected to foreign government officials, resulting in millions of dollars of business revenue.
“Bribery can take many forms, including granting employment to friends and relatives of government officials. Credit Suisse’s practice of engaging in these hiring practices violated the law, and it is now being held to account for having done so,” Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement.
The SEC’s order finds that Credit Suisse violated the anti-bribery and internal accounting controls provisions of the Securities Exchange Act. Credit Suisse agreed to pay disgorgement of $24.9 million plus $4.8 million in interest to settle the SEC’s case.
“Credit Suisse Hong Kong’s practice of employing friends and family members of Chinese government officials as a quid pro quo for lucrative business opportunities was both profitable and corrupt, and now the company will pay the price for that corruption,” says U.S. Attorney Richard Donoghue of the Eastern District of New York.
“In the banking industry, not every undertaking is fair game,” added Assistant Director-in-Charge William Sweeney Jr. of the FBI’s New York Field Office. “Trading employment opportunities for less-than-qualified individuals in exchange for lucrative business deals is an example of nepotism at its finest. The criminal penalty imposed today provides explicit insight into the level of corruption that took place at the hands of Credit Suisse Group AG’s Hong Kong-based subsidiary.”
The scheme netted CSHK at least $46 million in profits from business mandates with Chinese state-owned entities, the Justice Department says.
The Department says it reached its resolution based on a number of factors, including that CSHK did not voluntarily and timely disclose the conduct at issue. CSHK received partial credit for its and its parent company’s cooperation with the criminal investigation, including making foreign-based employees available for interviews in the U.S. and producing documents to the government from foreign countries in ways that did not implicate foreign data privacy laws.
The Justice Department says, however, CSHK did not receive additional cooperation credit because its cooperation was reactive and not proactive. Additionally, CSHK did not receive full credit for remediation because it failed to sufficiently discipline employees who were involved in the misconduct. Based on these considerations, the company received a non-prosecution agreement and an aggregate discount of 15 percent off the bottom of the U.S. Sentencing Guidelines fine range.