Bank of New York Mellon was fined for giving internships to the kids of government officials affiliated with a Middle Eastern sovereign wealth fund in an effort to allegedly win business, the SEC said.
Without admitting or denying wrongdoing, the bank agreed to pay a $US14.8 million penalty to settle charges that it violated anti-bribery and internal accounting controls provisions of the Foreign Corrupt Practices Act in 2010 and 2011.
According to the SEC’s order, BNY Mellon gave internships in to the son and nephew of one unnamed government official and to the son of another unnamed official. The country of the sovereign wealth fund was not named by the SEC.
The SEC alleged that the bank gave the internships to the kids because they “sought to corruptly influence foreign officials in order to retain and win business managing and servicing the assets of a Middle Eastern sovereign wealth fund.”
The government officials first approached bank in February 2010 about internships.
In its order, the SEC published emails purporting to show the importance of the internships being granted. Here’s the first set for the son and nephew (emphasis ours):
- A Boutique account manager wrote in a February 2010 email concerning the internship request for Interns A and B that BNY Mellon was “not in a position to reject the request from a commercial point of view” even though it was a “personal request” from Official X. The employee stated: “by not allowing the internships to take place, we potentially jeopardize our mandate with [the Middle Eastern Sovereign Wealth Fund].”
- In June 2010, an employee of BNY Mellon with primary responsibility for the Asset Management relationship with the Middle Eastern Sovereign Wealth Fund wrote of the internships for Interns A and B: “I want more money for this. I expect more for this. . . . We’re doing [Official X] a favour.”
- In a separate email to a different BNY Mellon colleague, the same employee stated “I am working on an expensive ‘favour’ for [Official X] — an internship for his son and cousin (don’t mention to him as this is not official).”
- The same employee advised a colleague in human resources: “[W]e have to be careful about this. This is more of a personal request . . . [Official X] doesn’t want [the Middle Eastern Sovereign Wealth Fund] to know about it.” The same employee later directed his administrative assistant to refrain from sending email correspondence concerning Official X’s internship request “because it was a personal favour.”
And for the son of the other official (Again, emphasis ours):
- The BNY Mellon custody relationship manager explained to more senior officers within BNY Mellon that granting Official Y’s request was likely to “influence any future decisions taken within [the Middle Eastern Sovereign Wealth Fund].”
- The same BNY Mellon relationship manager expressed to colleagues his concern that one of BNY Mellon’s competitors would agree to hire Intern C if BNY Mellon would not, and that BNY Mellon might lose market share to the competitor as a result.
- The relationship manager wrote: “Its [sic] silly things like this that help influence who ends up with more assets / retaining dominant position.”
- The relationship manager separately wrote that meeting Official Y’s requests was the “only way” to increase BNY Mellon’s share of business from the European Office, aside from obtaining assets in new countries.
The three boys got internships without any meetings or interviews. They also “did not meet these rigorous criteria” and didn’t have “the requisite academic or professional credentials” for the internships, the SEC said.
The bank also had no plans to hire the interns as full-time employees.
According to the SEC, the interns were “less than exemplary employees.” The SEC claimed that the son and nephew of the first official missed work frequently. The third intern, the son of the other official, was described by his manager as “ok” and not as hardworking as he would have hoped.
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