Tag: Credit Suisse

Hiring Relatives Government Officials Can Be an Illegal Bribe

Back in 2015, the Securities and Exchange Commission made it clear that providing jobs to family members of foreign government officials could be a violation of the Foreign Corrupt Practices Act. That SEC investigation found that BNY Mellon did not evaluate or hire the family members in accordance with its hiring standards and require a minimum grade point average and multiple interviews. The family members did not meet the criteria yet were hired with the knowledge and approval of senior BNY Mellon employees in order to corruptly influence foreign officials and win or retain contracts to manage and service the assets of the sovereign wealth fund.

It turns out that BNY Mellon was not the only one doing that. The SEC and DOJ brought charges against Credit Suisse for doing the same thing.

From 2007 to 2013, Credit Suisse provided valuable employment to the relatives and friends of certain foreign government officials in the “Asia-Pacific region” as a personal benefit to the requesting officials in order to obtain or retain investment banking business or other benefits for Credit Suisse. According to the SEC Order, this was a violation of the bank’s policy. The Order describes three separate instances when Credit Suisse did not hire a relative of a government official because of the FCPA risk.

But there were instances where managers wetn around the process and sneaked those relatives into the hiring process. The SEC found plenty of “smoking gun” emails and documents.

Credit Suisse maintained spreadsheets that listed “referral hires” or “relationship hires.” These spreadsheets included information identifying the referring client or relationship when the relationship was with a government regulator. Some of these spreadsheets identified the “[c]ontribution” of the referral hire, including in at least three instances, deals specifically attributable to the relevant relationship. In an email to colleagues, a Credit Suisse employee explained: “Relationship hires have to translate to $” or “the relationship is worthless to our organization.” This email was forwarded to a senior Credit Suisse banking official in the U.S. In a different email, a senior Credit Suisse banker stated that a referral hire “will get us a US$1bn bond deal. . . . His family requested to change his status to permanent with CS. Given [] the level of importance of this deal, we will decide to renew his contract for another 24 months instead of permanent.”

Some of these relatives may have been well- qualified (or at least marginally qualified) for the positions. But some were clearly not qualified and should have been fired for their behavior during the onboarding. During her probationary period one such relative referred to “Referral Hire A”, she exhibited unprofessional behavior.

  • She failed to attend a mandatory boot camp.
  • Brought her mother to training events, and left early.
  • She received the worst grade in the class on an assessment, commenting that “from the looks of her assessment she didn’t even try (she filled in a pattern of 5As in a row, 5 Bs in a row, etc. on the answer key).”
  • Referral Hire A “has been leaving at 4 pm right after every lecture every day this week while the rest of the class is working until at least 9pm, 10 pm.”

Not only was Referral Hire A approved as a employee after her probationary period, she was promoted a year later.

She was clearly unqualified to be a junior investment banker.

But as Matt Levine points out in his newsletter, she is qualified to be a senior investment banker.

When banks hire senior bankers from their competitors, they don’t quiz them on Excel shortcuts; they hire them for their Rolodexes, their books of business, their reputation and relationships with clients.

She did make the deal possible for Credit Suisse. One transaction with her relatives state-owned enterpise generated approximately $2,680,733 in revenue for Credit Suisse. That is what a senior investment banker does.

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Credit Suisse Settles OFAC Charges for $536 million

credit-suisse-logo

The Credit Suisse Group has reached a settlement with U.S. authorities related to U.S. dollar payments involving parties subject to U.S. sanctions. The $536 million global settlement with Credit Suisse represents by far the largest sanctions settlement in the history of US Treasury’s Office of Foreign Assets Control.

The settlement arises out of Credit Suisse’s processing of thousands of transactions over a 20 year period that concealed the involvement of sanctioned parties. Credit Suisse approached OFAC in early April 2006 about an internal investigation it was conducting related to U.S. securities transactions executed on behalf of an entity subject to U.S. sanctions. In early 2007, after the New York County District Attorney’s Office began looking into several suspicious wire transfers, Credit Suisse also informed OFAC of a separate internal investigation related to its activities as a U.S. dollar correspondent for payments involving Iran, Sudan, Burma, Cuba, North Korea.

The settlement agreement lays out the decades long history of bad behavior at Credit Suisse.

“Credit Suisse in Zurich had a standard procedure of structuring payments to avoid disclosing the sanctions nexus of transactions passed through the United States, deleting or omitting certain information when transactions were to be processed through the United States, and providing incorrect information in wire transfer instructions executed through the United States on behalf of U.S. sanctioned individuals and entities. This standard procedure was embodied in internal directives, memoranda, and e-mails involving, among others, a Credit Suisse Bank Payments sector head, Credit Suisse’s Treasury and Trade Finance departments, the head of Credit Suisse’s Iran desk, as well as in e-mails between Credit Suisse and its Iranian bank clients.

…

Specifically, from on or about August 19,2003, to on or about November 1,2006, Credit Suisse processed 4,775 electronic funds transfers, in the aggregate amount of USD 480,072,032.00, through financial institutions located in the United States to the benefit of the Government of Iran and/or persons in Iran, including various Iranian financial institutions, in apparent violation of the prohibition against the “exportation, … directly or indirectly, from the United States, … of any … services to Iran or the Government of Iran,” 31 C.F.R. § 560.204.”

Credit Suisse is making the $536 million payment pursuant to a settlement agreement with OFAC and deferred prosecution agreements with the New York Country District Attorney’s Office and the United States Department Justice.

I would expect that a shareholder class action suit will be filed shortly as well. We have seen these shareholder suits result from FCPA settlements.

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