Investment Bank Settles FCPA Violations

An investment bank agreed to pay over $70 million to settle charges of violating the Foreign Corrupt Practices Act. The settlement resolves actions brought by the SEC and the DOJ.

As explained in the Order, the SEC found that Credit Suisse Hong Kong Limited ("CSHK"), a Hong Kong-based subsidiary of Credit Suisse Group AG, violated the anti-bribery and internal accounting controls provisions of the Exchange Act by illegally granting employment to more than one hundred relatives and friends of influential Chinese officials between 2007 and 2013 as part of a quid-pro-quo arrangement. According to the SEC, the hiring practices were used to help CSHK secure lucrative investment banking business with Chinese state-owned entities ("SOEs"), as well as assistance in navigating the regulatory landscape. Despite CSHK written policies that explicitly prohibit the hiring of government referrals in exchange for business, senior CSHK managers allegedly continued to conduct "relationship" hires. The SEC asserted that these hires were generally less qualified than other employees at the same level. The SEC further said that the officials' relatives were given special treatment that included higher performance ratings. According to the Order, the fraudulent scheme netted CSHK at least $46 million in profits from business mandates with Chinese SOEs.

In a parallel proceeding, CSHK entered into a non-prosecution agreement with the DOJ and acknowledged responsibility for criminal conduct.

To resolve the SEC charges, CSHK will pay a total of $24.9 million in disgorgement of profits and $4.8 million in prejudgment interest. As part of its settlement with the DOJ, CSHK will pay a $47 million fine. CSHK also agreed to cooperate with the DOJ's ongoing investigations and strengthen its compliance programs.

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