CS Credit Suisse Group

By Brian Blackstone 

ZURICH -- Credit Suisse Group AG has become the latest big bank to be ensnared by U.S. authorities over the practice of hiring friends and family of Chinese officials, known as "princelings," to win business.

The Switzerland-based bank agreed to pay $77 million to settle charges from the Justice Department and Securities and Exchange Commission over the use of "relationship hires" between 2007 and 2013 that helped its Hong Kong subsidiary secure business, in violation of the Foreign Corrupt Practices Act.

The Hong Kong unit "engaged in a corrupt scheme to win business with Chinese state-owned entities by hiring friends and family of Chinese government officials, generating the bank at least $46 million in profits," Acting Assistant Attorney General John Cronan said in a statement Thursday. Credit Suisse agreed to pay $47 million to settle the Justice Department charges.

"These 'relationship hires' often lacked necessary technical skills, and offered fewer qualifications and significantly less relevant banking experience than other candidates for the jobs," Mr. Cronan said.

The bank had disclosed that settlement in its 2017 annual report, published last month. It also agreed to cooperate with the Justice Department in any continuing investigations and to improve compliance programs.

The SEC settlement, which hadn't been previously disclosed, totaled $30 million. Credit Suisse had offered to hire more than 100 employees at the request of foreign officials over a seven-year period, the SEC said.

"No criminal charges were brought, and there is no allegation that any clients, investors or counterparties were harmed by the conduct involved in the settlements," a Credit Suisse spokeswoman said.

In November 2016, JPMorgan Chase & Co. agreed to pay $264 million to settle charges with U.S. authorities over its Asian hiring practices, which put a spotlight on the practice of hiring the well-connected children of officials at state-owned firms.

Barclays PLC says it is cooperating with the Justice Department and SEC over its hiring practices in Asia and elsewhere.

HSBC Holdings PLC in 2016 said it was part of a multibank probe by the SEC over its hiring practices of candidates with ties to government officials or state-owned companies in the Asia-Pacific region.

The Justice Department statement Thursday laid bare some of the tactics used by Credit Suisse to hire princelings. It cited one email in which an executive of a state-owned Chinese firm referred a job candidate to a Credit Suisse banker in Hong Kong. The executive wrote that hiring the individual would "bring [the Hong Kong unit] the big surprise in the near future if [the unit] could...arrange a position in CS team in Beijing."

The Credit Suisse banker in turn emailed colleagues that "[r]elationship hires have to translate to $" or "the relationship is worthless to our organization," according to the Justice Department.

In another email, a Credit Suisse banker warned colleagues to go easy on a job candidate who was described as "a princess [who was] not used to too many rounds of interview."

The settlement with U.S. authorities won't have a material effect on the bank's finances, Credit Suisse said.

--Max Colchester and Margot Patrick contributed to this article.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

July 05, 2018 22:23 ET (02:23 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.