Credit Suisse Pays $76 Million for Sons and Daughters FCPA Violations in China (Part I of II)
Credit Suisse Group AG and its Hong Kong subsidiary settled FCPA charges with the Justice Department and the Securities and Exchange Commission. The Justice Department announced that Credit Suisse’s Hong Kong subsidiary agreed to pay $47 million in exchange for a non-prosecution agreement (NPA) for FCPA violations involving hiring of friends and families of Chinese officials to win investment banking business (here). The SEC announced that Credit Suisse agreed to pay nearly $30 million (in disgorgement and prejudgment interest) as part of civil administrative settlement for similar FCPA violations (here).
From approximately 2007 to 2013, Credit Suisse’s Hong Kong unit hired more than 100 employees in order to secure banking business and regulatory approvals from various state-owned enterprises and government agencies. Credit Suisse leveraged the corrupt hiring of unqualified individuals to secure business worth approximately $46 million in profits.
Credit Suisse hired unqualified relatives of foreign officials, and the subsequently provided continuing benefits such as promotions, bonuses and high-profile work assignments in a continuing effort to secure additional business from various government officials.
Credit Suisse managers and senior officials were aware of Hong Kong’s practice of making “relationship hires” or “referral hires” as part of an arrangement with government officials who referred such relatives to Credit Suisse for hiring, promotion and compensation.
The Justice Department and SEC settlement documents outlined numerous instances where Credit Suisse officials communicated in emails the need to hire, retain, promote or compensate otherwise unqualified individuals in order to secure government business. In practice, many of the hired relatives were unqualified, lacking in capabilities, and excused from training and performance requirements. In a few cases, Credit Suisse employees drafted resumes for relatives to justify a hiring decision.
In reaching a settlement, DOJ outlined the following considerations under its FCPA Corporate Enforcement Policy:
- Credit Suisse did not receive credit for voluntary disclosure because it did not make a voluntary and timely disclosure to DOJ.
- Credit Suisse received partial credit for its cooperation, including conducting an internal investigation, factual presentations to DOJ, making foreign-based employees available for interviews in the United States, producing documents from foreign countries that did not implicate data privacy laws, providing translations of foreign language documents and collecting and presenting evidence to DOJ. However, Credit Suisse received only partial credit because its cooperation only occurred in response to DOJ’s investigation and had not been initiated prior to learning about DOJ’s investigation.
- Credit Suisse received credit for remediation for the following measures: (a) adding new controls related to its hiring program; (b) implementing global controls to ensure anti-corruption vetting for all candidates referred for employment by government officials and SOEs; (c) requiring independent screening and validation of absence of connections to government officials, SOEs and politically exposed persons; (d) additional post-hiring controls to employees how may have links to government officials and SOEs, such as maintaining ethical walls to prevent identified employees from working on matters involving foreign officials and tracking of their performance; (e) conducting periodic reviews of hiring controls(f) conducting annual headcount reviews and confirming accuracy of data; and (g) requiring improved training on anti-corruption issues for all staff, as well as job-specific training for bankers, recruiters, human resources and compliance personnel. Interestingly, Credit Suisse did not receive full remediation credit because it failed to discipline adequately employees who engaged in the misconduct and only noted policy infractions internally and notified only three employees.
- Credit Suisse committed to enhance its compliance program and internal controls. Based on the state of its compliance program, its commitment to enhance its compliance program, its agreement to provide annual compliance program reports, DOJ declined to impose an independent corporate monitor.
- Credit Suisse agreed to continue to cooperate in further investigations of related individuals.
Based on all of these considerations, the Justice Department agreed to enter into an NPA and apply a 15 percent discount from the bottom of the US Sentencing Guideline range.