Investment management firm Legg Mason entered a non-prosecution agreement and agreed to pay $64.2 million to resolve an investigation into violations of the Foreign Corrupt Practices Act concerning its participation in a Libyan bribery scheme, the Department of Justice announced Monday.
Legg Mason disclosed in a securities filing on May 30 that it had expected to soon complete negotiations with both the Department of Justice and the SEC to resolve the FCPA case. According to Legg Mason’s admissions, between 2004 and 2010, a Legg Mason subsidiary, Permal Group, partnered with Société Générale to solicit business from state-owned financial institutions in Libya. During this time, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions. For each transaction, Société Générale paid the Libyan broker a commission of between 1.5 and 3 percent of the nominal amount of the investments made by the Libyan state institutions.
For seven of the transactions, Société Générale paid commissions to the Libyan broker to benefit Legg Mason, through its subsidiary Permal, which managed funds invested by the Libyan state institutions. In total, Société Générale paid the Libyan Intermediary more than $90 million, portions of which the Libyan broker paid to high-level Libyan officials to secure the investments from various Libyan state institutions for Société Générale.
From the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million. Legg Mason, through Permal, managed seven of these investments and earned profits of approximately $31.6 million.
The $64.2 million payment includes a penalty of $32.625 million to the U.S. Treasury, and disgorgement of $31.617 million, which will be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement. Additionally, as part of the non-prosecution agreement, Legg Mason has agreed to continue to cooperate with the Department of Justice in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to report to the Department on the implementation of its enhanced compliance program.
The Department of Justice said it reached this resolution based on a number of factors, including that Legg Mason did not voluntarily and timely disclose the conduct at issue, but did fully cooperate in the investigation, and fully remediated. “Moreover, Legg Mason’s misconduct involved only mid-to-lower level employees of Permal, a subsidiary company, and was not pervasive throughout Legg Mason or Permal,” the Justice Department stated.
“Société Générale—and not Legg Mason or Permal—maintained the relationship with the Libyan broker and was responsible for originating and leading the scheme; the profits earned by Legg Mason and Permal were less than one-tenth of the profits earned by Société Générale; and neither Legg Mason nor Permal has a history of similar misconduct.”
Société Générale and its wholly owned subsidiary, SGA Société Générale Acceptance, on June 4 resolved its case, agreeing to pay a combined total penalty of more than $860 million to resolve charges with criminal authorities in the United States and France. These penalties include $585 million relating to a multi-year scheme to pay bribes to officials in Libya, and $275 million for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR).