French banking group Société Générale and its wholly owned subsidiary, SGA Société Générale Acceptance, will 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).
According to the Department of Justice, SGA Société Générale Acceptance will plead guilty in the Eastern District of New York concerning the resolution of the foreign bribery case. Together with approximately $475 million in regulatory penalties and disgorgement that Société Générale has agreed to pay to the Commodity Futures Trading Commission (CFTC) for the LIBOR scheme, the total penalties to be paid by the bank exceed $1 billion.
In related proceedings, Société Générale reached a settlement with the Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme. The United States said it will credit $292,776,444 that Société Générale will pay to the PNF under its agreement, equal to 50 percent of the total criminal penalty otherwise payable to the United States.
“For years, Société Générale undermined the integrity of global markets and foreign institutions by issuing false financial data and by fraudulently securing contracts through bribery,” said Acting Assistant Attorney General John Cronan. “Today’s resolution—which marks the first coordinated resolution with France in a foreign bribery case—sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law enforcement response.”
FCPA case details
According to the companies’ admissions, between 2004 and 2009, 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 one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions.
In total, Société Générale paid the Libyan Intermediary over $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. Because of 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.
Société Générale will enter into a deferred prosecution agreement in connection with charges of conspiracy to violate the anti-bribery provisions of the FCPA and transmitting false commodities reports.
Pursuant to its agreement with the Department, Société Générale agreed to pay a total criminal penalty of $585 million to the Justice Department. Société Générale also agreed to continue to cooperate with the Department’s investigation and adopt and maintain enhanced compliance procedures. The guilty plea is scheduled to take place on June 5 before U.S. District Judge Dora Irizarry of the Eastern District of New York.
The Department of Justice said it entered this resolution “in part due to Société Générale’s failure to voluntarily self-disclose the companies’ misconduct to the Department” and “the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials.”
Additionally, Department of Justice said that the company’s “substantial, though not full, cooperation with the Department; and the company’s significant remediation which, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption, resulted in the Department determining that a monitor was not necessary in this case.”
As admitted by Société Générale, between May 2010 and at least October 2011, Société Générale promulgated falsely deflated U.S. dollar (USD) LIBOR submissions to make it look as though Société Générale could borrow money at more favorable interest rates than it was able to do. “This downward manipulation allowed Société Générale to create the appearance that it was stronger and more creditworthy than it was,” the Department of Justice said.
The USD LIBOR manipulation scheme was ordered by senior executives of Société Générale, who tasked the managers of the company’s treasury department with overseeing the execution of the deflation effort. Several employees within Société Générale’s treasury department ensured that the company’s USD LIBOR submissions were altered in accordance with the deflation directive.
Furthermore, certain Société Générale employees in London and Tokyo in 2006 worked together to manipulate Société Générale’s Japan Yen (JPY) LIBOR submissions. These employees endeavored to manipulate JPY LIBOR in order to benefit the trading positions of a Société Générale employee.
Under the terms of the agreement, Société Générale will pay a fine of $275 million to resolve the LIBOR misconduct matter.
The deferred prosecution agreement and the plea agreement are subject to court approval.