The American investment bank will end a three-year U.S. investigation by paying millions and admitting that it did a quid pro quo: hiring the offspring of influential Chinese in exchange for business. 

J.P. Morgan’s Hong Kong subsidiary will cough up $264 million for hiring the offspring of influential Chinese businesspersons in return for winning investment banking business, the «New York Times» reported on Thursday, citing undisclosed federal sources. 

The New York-based investment bank ran afoul of U.S. bribery laws by systemically tracking hiring of princelings in its «Sons and Daughters» program to specific clients, as well as its own ability to convert these relationships into corporate business.

Princelings are sons and daughters of prominent Communist party officials, but the term is often used to refer to the influential business elite as well.

«Linear Relationship»

The bank will reportedly accept investigators’ findings as part of the settlement, one of the last major regulatory snafus facing J.P. Morgan. The bank secured a so-called non-prosecution agreement, meaning criminal charges will be put aside after a period of time provided certain requirements – including paying a fine – are fulfilled.

While such hiring practices are highly illegal – and unheard of – in the U.S., they are a regulatory gray area in emerging China, both within banking and in other industries. The American bank appears to have taken this practice a step further by specifically hiring offspring of officials from state-run firms looking to go public.

«You all know I have always been a big believer of the Sons and Daughters program – it almost has a linear relationship» with winning Chinese corporate business, one executive wrote in an email cited by the «Times».