This Week in Compliance

This Week in Compliance: SocGen reaches USD 585 million settlement to resolve FCPA offenses

Here’s what’s been going on in the compliance world this week: 

Business

  • Chinese phone maker ZTE reaches deal with U.S.: ZTE and the U.S. Commerce Department reached a deal which will reverse a ban on ZTE buying parts from U.S. suppliers, allowing the phone maker to get back into business. The deal requires ZTE to change its board and management within 30 days, pay a USD 1 billion fine, and put an additional USD 400 million in escrow. ZTE’s 10-year ban will be suspended but may be reactivated at any time if more violations occur. The company ceased a major part of its operations in April after the U.S. imposed a 7-year ban on the company for violating a 2017 agreement made after the company was found to have shipped goods to Iran and North Korea in violation of U.S. sanctions.
  • SocGen reaches USD 585 million settlement to resolve FCPA offenses: Société Générale S.A, one of France’s biggest banks, reached a settlement with U.S. and French authorities totaling USD 585 million. The settlement is the first coordinated enforcement action between the U.S. Department of Justice (DOJ) and France’s Parquet National Financier (PNF). The bank also agreed to pay 50% of the settlement to the PNF and will receive a credit against the U.S. fine. As part of the settlement, SocGen will enter into a deferred prosecution agreement with the DOJ. In addition, the bank’s U.S subsidiary will plead guilty to an FCPA conspiracy charge in federal court. The settlement relates to charges that it paid over USD 90 million in bribes to the Gaddafi regime in Libya between 2004 and 2009 through the use of an intermediary, which helped the bank land 14 investments from Libyan state-owned institutions.
  • Legg Mason resolves FCPA charges related to SocGen settlement: Legg Mason Inc., a Maryland-based investment management firm, agreed on Monday to pay USD 64.2 million in fines and disgorgement for conduct in Libya, where it had partnered with SocGen to solicit business from state-owned institutions in the country. The commissions paid by SocGen to the Libyan broker benefitted Legg Mason through its subsidiary Permal, which managed funds invested by the Libyan state institutions. The charges were settled using a non-prosecution agreement and no charges were filed in court. The total settlement consists of USD 32.6 million in disgorged profits and USD 31.6 million in fines. In addition, Legg Mason agreed to enhance its compliance program and report to the DOJ on its progress.
  • Credit Suisse settles FCPA charges over Asian hiring practices: Swiss banking giant Credit Suisse announced on Wednesday that it has reached a non-prosecution agreement with the U.S. DOJ over its hiring practices in Asia between 2007 and 2013. The DOJ inquiry concerned questions over whether the bank had hired referrals from state-owned agencies in return for investment business or regulatory approvals. The bank has agreed to pay a USD 47 million penalty and no criminal charges will be filed in court. The settlement follows a 2016 settlement in which American banking giant JPMorgan Chase paid USD 264 million in penalties for hiring friends and relatives of Chinese government officials in a bid to win banking deals.

Government

  • Spanish Prime Minister Rajoy ousted from office amidst corruption scandal: Prime Minister Rajoy was removed from office after losing a vote of no-confidence in Spain’s parliament. The vote of no-confidence came after the country’s highest criminal court found that Rajoy’s party, the People’s Party (PP), had benefitted from a vast kickback scheme known as the Gürtel case and imposed a fine of EUR 240,000 on the party. A close aide to Mr. Rajoy, former PP treasurer Luis Bárcenas, was sentenced to 33 years of imprisonment for his involvement in the scheme. Judges further said they did not believe Mr. Rajoy when he testified he had no knowledge of the scheme. Mr. Rajoy has been replaced by Pedro Sanchez, the leader of the opposition party which tabled the motion to unseat him.
  • Top aide to French President Macron faces accusations of influence peddling: Alex Kohler, Macron’s chief of staff, is facing a preliminary investigation launched by France’s top financial prosecutor into allegations that Kohler breached conflict-of-interest rules in previous positions he has held. Kohler has been described as a member of “the trio that rules France”. The charges relate to the “circumstances and conditions” under which Kohler dealt with cases related to an Italian-Swiss shipping and cruise company named the Mediterranean Shipping Company (MSC) while he worked at a state agency managing state holdings. Kohler then went on to join MSC as financial director in 2016. Mr. Macron’s office has indicated that Kohler intends to cooperate with the investigation.

Noteworthy

  • Ex-FBI lawyer Lisa Osofsky named new SFO director: The UK’s Serious Fraud Office will be led by Lisa Osofsky, a dual US and British citizen, who is a former FBI lawyer who prosecuted over 100 cases on behalf of the US government. Osofsky has been working in the private sector for the last decade, most recently at financial crime consultancy Exiger. Her appointment has been interpreted as a move signaling closer cooperation and a strengthening of ties with the U.S. white-collar crime enforcement agencies.  News of the appointment was widely expected and follows news that funding for the SFO is to rise by 50% this year in order to allow it to take on bigger cases. Osofsky replaces outgoing director David Green, whose six-year term ended at the end of April. The SFO will be led by Interim Director Mark Thompson until Osofsky joins later this year.
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