The New York Times has a bombshell report on JPMorgan Chase's business dealings in China: From 2006 to 2008, JPMorgan paid $1.8 million to a small consulting firm in Beijing owned by Lily Chang. That seemed a large amount, report David Barboza, Jessica Silver-Greenberg, and Ben Protess, because "on the surface, Ms. Chang lacked the influence and public name recognition needed to unlock business for the bank."

Except, as JPMorgan's Hong Kong executives knew, Lily Chang wasn't her real name. "It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who at the time was China's prime minister, with oversight of the economy and its financial institutions," The New York Times says.

And the Wen family's sway was not just political. After Ms. Wen's father joined the inner circle of China's rulers as vice prime minister in 1998, the family amassed a secret fortune through a series of partnerships and investment vehicles, a 2012 investigation by The Times found. Now, United States authorities are scrutinizing JPMorgan's ties to Ms. Wen, whose alias was government approved, as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned Chinese companies. [New York Times]

JPMorgan is cooperating with the investigation, by the Securities and Exchange Commission and federal prosecutors in Brooklyn, and hasn't been accused of any wrongdoing, The Times notes. But that may not last.

High-level nepotism may be unseemly, but it isn't generally illegal. Bribery is. "The distinction between hiring a relative of a foreign official who may be well connected, and employing such a person with the express hope of winning specific business, is key to proving violations of the U.S. Foreign Corrupt Practices Act (FCPA)," explains Reuters. And to be clear about the direction the SEC is looking, its "anti-bribery unit is leading the JPMorgan probe," Reuters adds.

The FCPA was enacted in 1977, in the wake of the Watergate scandals. It was intended to deter U.S. companies from bribing foreign officials. Thanks to subsequent amendments and a decade's worth of ramped-up enforcement, it now "strikes fear throughout the executive offices of companies with overseas operations, generating huge fees for law firms and large fines for the federal government," said Charlie Savage in a 2012 New York Times explainer of the law.

The FCPA doesn't just prohibit companies from handing bags of cash to corrupt foreign officials, either — though that does happen. According to the Justice Department's synopsis for non-lawyers, the law applies to "any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person" designed to, among other things, "secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person."

Did JPMorgan cross that line from nepotism into bribery?

The Wen case doesn't appear to be as clear-cut as, say, ATM-maker Diebold's recent settlement with the SEC and Justice Department. On Oct. 22, the SEC announced that Diebold agreed to pay $48 million to settle civil and criminal charges that it spent $3 million on lavish vacations, gifts, and hidden cash payments to officials at state-owned Chinese banks, plus banks in Russia and Indonesia.

"A bribe is a bribe, whether it's a stack of cash or an all-expense-paid trip to Europe," said the SEC's Scott W. Friestad at the time. "Public companies must be held accountable when they break the law to influence government officials with improper payments or gifts."

If The New York Times has the goods on JPMorgan, it doesn't lay them out — though it does have an amazing, slightly damning chart detailing the web of connections between the Wen family and JPMorgan. And the bank appears to have a larger pattern of putting the relatives of China's elite on the payroll, sometimes followed by lucrative contracts. That's not specific to JPMorgan, of course: The practice is so widespread that these nepotistic hires have a name: Princelings.

Still, there is circumstantial evidence that JPMorgan explicitly tied the hiring of well-connected Chinese to specific deals the bank wanted to seal — Bloomberg News uncovered just such a spreadsheet in August — and the company appears to have gotten its money's worth by hiring Wen Ruchun's two-person firm, Fullmark Consultants.

In a confidential letter, The Times reports, Fullmark claimed "that it 'introduced and secured' business for JPMorgan from the state-run China Railway Group, a construction company that builds railways for the Chinese government." The bank did underwrite China Railway Group's 2007 initial public offering. The Times can't say if Wen Jiabao played any role in that deal, but notes that "as prime minister, he would have had ultimate responsibility for state-owned companies and their regulators."

But unless federal investigators uncover something more damning — like a letter tying the offer of a job to a promise of help securing a deal with some relative in power — JPMorgan essentially hired a woman named Lily Chang, with a résumé that includes an MBA from the University of Delaware and stints at Lehman Brother and Credit Suisse First Boston.

Even The New York Times acknowledges that the documents it has seen "do not identify a concrete link between the bank's decision to hire children of Chinese officials and its ability to secure coveted business deals, a connection that authorities would probably need to demonstrate that the bank violated anti-bribery laws." Also, JPMorgan's Hong Kong branch reportedly hired Wen without running it by corporate headquarters in New York.

Whether or not the payments to Wen amount to bribery, though, the larger SEC/DOJ investigation may get pretty expensive for JPMorgan. The most famous recent FCPA case is Walmart's alleged bribery of Mexican officials to expedite the opening of stores in their country. The New York Times reported in 2012 that Walmart Mexico doled out $24 million in 2005, including envelopes of cash to local officials and petty bureaucrats. This year alone, Walmart has spent more than $300 million dealing with the aftermath and trying to avoid a FCPA indictment.

Of course, $300 million seems to be drop in the bucket for a bank that just agreed to pay $13 billion to settle allegations related to pawning shady mortgage-backed bonds off to a whole bunch of angry investors.

Read the entire Wen article at The New York Times.