JPM JP Morgan Chase and Co

By Katy Burne 

The Federal Reserve said it was seeking to fine two former J.P. Morgan Chase & Co. managing directors and permanently ban them from working in the banking industry for their involvement in a corrupt hiring program that led the bank to pay $264 million in fines.

The actions against the two individuals, Fang Fang and Timothy Fletcher, come after the bank reached separate settlements with the Justice Department, the Securities and Exchange Commission, and the Fed, including a civil $61.9 million penalty it paid to the central bank over lapses in its hiring and antibribery controls last November.

The Fed said it would seek to fine Mr. Fang $1 million and Mr. Fletcher $500,000 in civil damages. It alleged that they offered internships and other jobs at the investment bank in Asia to so-called princelings in exchange for winning business from prospective clients and foreign officials.

Those actions, which it said dated from January 2008 to April 2013 in both cases, were prohibited under bank policies and U.S. law. The Foreign Corrupt Practices Act bars employees from offering, directly or indirectly, anything of value to foreign officials or commercial entities to win business.

"Fang Fang was a respected senior banker at J.P. Morgan and had an outstanding reputation," said Joan Meyer, a lawyer at Baker McKenzie who represents Mr. Fang. "He should not have been singled out for administrative action by the Federal Reserve in contrast to so many bankers in the same position and he intends to vigorously dispute these allegations."

A lawyer from Mr. Fletcher didn't immediately respond to requests for comment.

A spokesman for J.P. Morgan declined to comment. In 2013, the bank ended the referral hiring program, known internally as the Sons and Daughters program because it offered employment opportunities to the relatives and friends of the bank's business contacts. Under the bank's settlements, it admitted to violating the Foreign Corrupt Practices Act.

As part of the bank's $72 million settlement agreement with the Justice Department, the bank agreed to cooperate in investigations relating to the misconduct, beef up its compliance programs and enter a nonprosecution agreement.

Mr. Fang was managing director and head of J.P. Morgan's China investment-banking unit from 2007 until his resignation in June 2014. He also managed the referral hiring program, the Fed said, which made the bank at least $35 million in profit from fees with Chinese state-owned companies, according to the Justice Department.

The Fed said Mr. Fang was the program's "gatekeeper" and had final signoff for proposed candidates. In one instance in 2011, the Fed said he was told the bank would gain a senior role in an initial public offering of a client's stock if the bank hired a relative of the company's chairman full time.

Mr. Fletcher was head of the junior resources management group at the firm in Asia from 2008, putting him in charge of administering the hiring program for the Asia-Pacific region. J.P. Morgan terminated his employment in April 2015.

"The misconduct described herein involves personal dishonesty or a willful or continuing disregard for the safety and soundness of the firm" on the part of the executives, the Fed said in a notice.

Last year, the Journal reported that some of the individuals referred to the hiring program by clients and foreign officials lacked proper qualifications. One candidate was described in an email as "the worst [business analyst] candidate they had ever see[n]." Another had a "napping habit."

The Fed said Mr. Fang was told that one referred intern was "way underqualified" but was informed that the intern was "our ticket to this mandate."

Emily Glazer contributed to this article.

Write to Katy Burne at katy.burne@wsj.com

(END) Dow Jones Newswires

March 10, 2017 16:52 ET (21:52 GMT)

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