BNY Mellon to pay $14.8mn to settle bribery case

Aug 18, 2015, 3:26 PM EDT
CEO of Investment Management at The Bank of New York Mellon Corporation and VC at The Bank of New York Mellon Corporation, Curtis Arledge, speaks at the Womenomics conference, hosted by BNY Mellon and Newton Investment Management, at Ham Yard Hotel on April 8, 2015 in London, England.
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BNY Mellon agreed to pay $14.8 million to settle a bribery case about internships given out unfairly. Bloomberg reported that the bank's payment would settle a U.S. regulator’s claims that it broke anti-bribery laws in awarding internships to family members of officials with ties to a Middle Eastern sovereign wealth fund. The bank hired sons of two officials and a nephew of one of them without adhering to its own standards for evaluating candidates, the U.S. Securities and Exchange Commission said Tuesday. The internships were offered as a way to win contracts for servicing assets of the sovereign wealth fund, the SEC said in a complaint outlining its administrative proceeding.

The Foreign Corrupt Practices Act “prohibits companies from improperly influencing foreign officials with ‘anything of value,’” Andrew Ceresney, director of the SEC’s enforcement division, said in the agency’s statement. “BNY Mellon deserved significant sanction for providing valuable student internships to family members of foreign officials to influence their actions.” One of the government officials described his internship request as an “opportunity” for BNY Mellon and became angry when the bank delayed offers, according to the SEC complaint. The interns were “less than exemplary employees” and were confronted by human resources concerning repeated absences from work, but were retained to influence the government officials.

“We are pleased to reach an agreement with the SEC that allows us to put this matter behind us,” Kevin Heine, a BNY spokesman, said in a statement. The SEC has made enforcing anti-bribery laws a priority. The agency is pursing high-profile cases, including allegations of favoritism for children of Chinese officials at JPMorgan Chase & Co. and deals in Africa involving Och-Ziff Capital Management Group.

The settlement by the U.S. Securities and Exchange Commission marked the first time regulators had charged a bank for violating the Foreign Corrupt Practices Act, which prohibits paying bribes to foreign officials, notes Reuters. It followed a 2011 industrywide sweep, undertaken as part of a broader foreign bribery probe, in which the SEC sought information about financial institutions' business dealings with state-owned investment funds. The BNY Mellon case is also the first foreign bribery enforcement action in which internships, as opposed to cash, constituted the alleged bribe, SEC enforcement director Andrew Ceresney said. Other banks including JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Deutsche Bank AG (DBKGn.DE) have also been investigated over whether their hiring practices violated the foreign bribery statute.