BNY Mellon will pay $14.8 million to settle claims that it preferentially gave internships to the relatives of a Middle Eastern sovereign wealth fund manager to get business, the Securities and Exchange Commission announced Tuesday.
The agency said the bank went around its normal hiring practices to give the relatives positions in an attempt to get the fund’s business, which is illegal under the Foreign Corrupt Practices Act.
The law “prohibits companies from improperly influencing foreign officials with ‘anything of value,’ and therefore cash payments, gifts, internships or anything else used in corrupt attempts to win business can expose companies to an SEC enforcement action,” said the SEC’s Andrew Ceresney. “BNY Mellon deserved significant sanction for providing valuable student internships to family members of foreign officials to influence their actions.”
BNY Mellon settled without admitting guilt.
According to the SEC, two officials at the unnamed Middle Eastern sovereign wealth fund, which was doing business with the bank, requested internships for their relatives in 2010: One official wanted them for his son and nephew, while the other official asked for an internship for his son. All were recent college graduates.
They pressed the bank’s employees for the internships, and messages among bank employees indicate that they viewed it as essential to business that they accommodate the request.
“I am working on an expensive ‘favor’ for [Official X] — an internship for his son and cousin (don’t mention to him as this is not official),” one of the messages reads.
Another employee said in an internal email that the bank was “not in a position to reject the request from a commercial point of view.”
“By not allowing the internships to take place, we potentially jeopardize our mandate with” the fund, the email reads.
Regarding the other fund manager’s request for an internship for his son, a bank employee wrote that “Its [sic] silly things like this that help influence who ends up with more assets/retaining dominant position.”
The relatives were then hired without even being interviewed, according to the SEC, even though they did not meet the normal academic requirements for the selective internships.
Regulators are often concerned about banks handing out internships to curry favors with foreign governments.
Reuters reported last year that the SEC was investigating Goldman Sachs regarding the internship of a brother of a former official at Libya’s sovereign wealth fund.
In another recent example, regulators in February scrutinized JPMorgan Chase’s employment of the son of China’s commerce minister.
