The FCPA world was rocked last week with two enforcement actions involving illegal conduct by two separate entities and representatives of the Libyan government in regard to its sovereign wealth fund. One involved the investment adviser Legg Mason and the second involved the French banking giant Société Générale S.A. (SocGen), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V. SocGen paid a criminal fine of $585 million for its FCPA violations—one-half payable to the United States and one-half payable to French Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme.
There was also an additional $275 million paid by SocGen for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR). While it was the $585 million FCPA penalty that garnered most of the U.S. attention, the more lasting impact may well involve the LIBOR issues, as the LIBOR manipulation had C-Suite involvement by literally the highest levels at SocGen. Michele Peretie, former head of corporate banking and investment at SocGen, resigned when the scandal was uncovered “to pursue other opportunities,” and Didier Valet, former deputy chief executive, resigned earlier this year, over alleged differences in approaches to resolving the matter with the Justice Department. At the time of his resignation Valet was reported to be in line to succeed Frédéric Oudéa as SocGen’s chief executive.
One news report, however, throws some serious cold water on Valet’s stated reason for his resignation, indicating that the Justice Department believed that Peretie and Valet directed the LIBOR manipulation to lower-level employees. The Justice Department provided that information to French authorities in an April 2015 letter, which was included in a court filing last month by defense attorneys in the case of a former SocGen banker indicted in the United States for LIBOR manipulation.
Rarely does one see the C-Suite implicated in fraud claims, whether they involve bribery and corruption under the FCPA, or such fraud as LIBOR manipulation. It will be interesting to see if the Justice Department pursues anything further against any high-ranking executives at SocGen. If the only penalty is voluntary resignation, will that be enough to deter such conduct, or does the Yates Memo mandate control?