The former head of China investment banking at JPMorgan Chase has been arrested by Hong Kong's anti-corruption agency, a Chinese news report and a person briefed on the matter said on Wednesday, possibly opening up a significant new front in what has become a global investigation into the Wall Street bank's hiring practices in China.
Fang Fang, 48, has been released but is restricted from leaving Hong Kong after being arrested recently by the city's Independent Commission Against Corruption, or ICAC, according to a report in Caixin, a respected Chinese-language financial news outlet based in Beijing. The contents of the report were confirmed by a person briefed on the matter.
Fang, who left JPMorgan in March, has been a focus of a federal bribery investigation in the United States into whether the bank's ''Sons and Daughters'' hiring programme violated the Foreign Corrupt Practices Act, or FCPA. Since last year, the US authorities have been scrutinising connections between the bank's roles in specific deals and its employment of the children of senior Chinese officials and business leaders.
The person briefed on the matter confirmed on Wednesday that Fang had been arrested and said the contents of the Caixin report were accurate, but declined to be identified because the person was not authorised to speak publicly.
It was unclear when Fang had been arrested or how long he had been detained before being released. When reached on his cellphone on Wednesday, Fang asked whether the call was to see "if I'm alive". He added that he could not discuss his situation. The ICAC and JPMorgan both declined to comment.
Fang's licence as a broker was cancelled or surrendered on March 21, according to a database maintained by Hong Kong's securities regulator. On March 24, JPMorgan announced in an internal memo that Fang had recently expressed ''his desire to retire.''
Two days later, on the evening of March 26, more than 10 officials from the ICAC conducted a search at JPMorgan's local headquarters in the city's Central business district, confiscating documents from Fang's office, according to a report in late March in the Chinese-language Hong Kong Economic Journal newspaper.
The scope of the scrutiny of JPMorgan's hiring practices may expand. In accordance with the FCPA, the United States investigation into JPMorgan's hiring practices has focused on links between the bank and Chinese government officials or state-controlled enterprises. But Hong Kong's Prevention of Bribery Ordinance, which the anticorruption agency helps enforce, is significantly broader in scope and covers graft in all forms, not just practices that involve government officials or state entities.
Fang was one of several JPMorgan executives whose emails discussing hiring practices were turned over to the United States authorities by the bank. In one of them, he wrote: ''You all know I have always been a big believer of the Sons and Daughters programme - it almost has a linear relationship'' with winning assignments to advise Chinese companies.
Neither Fang nor any JPMorgan executives have been accused of wrongdoing as a result of the investigations. Although the ICAC may question and arrest individuals as part of its investigations, the decision to bring formal charges rests with Hong Kong's public prosecutor, which relies on the evidence gathered by the anticorruption agency.
Fang had been seen as one of JPMorgan's top rainmakers in China, an executive whose deep network of contacts in Chinese government and business circles helped introduce a flow of lucrative underwriting and advisory roles to the bank.
Those included deals with the China Everbright Group, a state-owned financial services and banking group whose relationship with JPMorgan is a subject of the investigation by the United States Securities and Exchange Commission and federal prosecutors in Brooklyn.
As The New York Times previously reported, China Everbright's chairman, Tang Shuangning, approached Fang in March 2010 about a position for his son at the bank. Fang jumped at the opportunity, suggesting in an email to his colleagues that they discuss ''how we can leverage more on this account going forward.''
After the son, Tang Xiaoning, - a former employee of Goldman Sachs and Citigroup - began working at JPMorgan, a number of assignments from his father's company rolled in for the bank, including an advisory role on a $162 million share sale in 2012 by China Everbright International, a subsidiary focused on alternative energy.
JPMorgan has recently distanced itself from several deals in which its current or former employees were related to executives at the companies involved. In November, JPMorgan removed itself as an underwriter on a share sale by China Everbright Bank, a subsidiary of the state-run group. China Everbright Bank went on to raise $3 billion in December, in Hong Kong's biggest initial public offering of 2013.
In January, concerns about the investigation prompted JPMorgan to remove itself from a second deal, a planned $1 billion Hong Kong IPO by Tianhe Chemicals, which is not owned by the state. JPMorgan had employed the daughter of the company's chairman.
With its arrest of Fang, Hong Kong's anticorruption agency is likely to examine his role in some of the same deals that the United States officials have been investigating.
A Chinese national, Fang graduated from Tsinghua University in Beijing and received his MBA from Vanderbilt University in Nashville, Tenn. Before joining JPMorgan in Hong Kong in 2001 he was a vice president of Beijing Enterprises Holdings, a state-owned investment company listed in Hong Kong, and he had also worked as an investment banker at Merrill Lynch in both Hong Kong and New York. In 2011, he was appointed a member of the Chinese People's Political Consultative Congress, a state advisory body.
Although the Tianhe deal might not have triggered concerns in the United States investigation because, as a privately owned company, it does not appear to involve the dealings with state entities or foreign officials that are the focus of the F.C.P.A., it could come under scrutiny in Hong Kong.
Under the ''one country, two systems'' policy, Hong Kong, a former British colony, retains its own legal system despite its return to Chinese rule in 1997.
''The principles of corruption are fairly universal but the scope of Hong Kong law is greater because it extends to nongovernment entities,'' David Webb, a corporate governance activist in Hong Kong, said on Wednesday. ''The limitation is that there is no extradition or rendition treaty between Hong Kong and the mainland,'' he added.
©2014 The New York Times News Service
