Hong Kong exchange head denies claims of 'princelings' at JP Morgan

The US Justice Department launched a criminal investigation in 2013

Charles Li, the head of the Hong Kong stock exchange operator HKEx, has hit back at an attempt to implicate him an intern hiring scandal when he was head of JP Morgan’s China arm.

Mr Li said he could not remember specific aspects of the JP Morgan hiring programme, as he had left the bank in 2009, but that he had followed the rules at all times.

The US Justice Department launched a criminal investigation in 2013 into claims that JPMorgan violated the US Foreign Corrupt Practices Act by hiring the relatives of powerful Chinese business leaders in order to generate business.

The Wall Street Journal has published emails which appear to show that Mr Li considered the wider benefits to the bank of hiring the children or acquaintances of powerful Chinese officials.

However, the emails also show that Mr Li, the first mainland-born Chinese to head HKEx, enquired about the qualifications of candidates before making recommendations. In one email he indicated he was prepared to risk damaging a client relationship rather than hire an unqualified candidate, and in several cases he turned candidates down.

Mr Li also complained to colleagues about the pressure he was under from clients and friends. “I wish there was a law against referals [sic],” he told a colleague in one email, according to the Wall Street Journal, which also reported that Mr Li had not been interviewed or questioned in relation to the investigation.

In a statement Mr Li said: “I left JP Morgan Chase China in 2009 but I can recall that there was a formal process in place within the bank for dealing with these matters which I followed. This included a thorough screening process involving the bank’s legal and compliance teams and offers were made on the basis of a review of the applicants’ credentials and feedback from multiple sources, not on the opinion or decision of any one individual person within JP Morgan”.

For many years it has been standard practice for Western investment banks to hire “princelings”, the sons and daughters of senior Communist party officials, as a way to build connections.

Mr Li sponsored a large number of referrals, including at least eight in 2008. Those appointments included a family friend of Huang Hongyuan, then a senior official at the China Securities Regulatory Commission and now the president of the Shanghai Stock Exchange, of which he said, “I need to make it work”.

Some of the eight were eight-week internships, while others were for one year.