Legg Mason Inc., a Maryland-based investment management firm, settled FCPA violations in Libya caused by its partner Société Générale S.A., by agreeing Monday to pay $64.2 million in penalties and disgorgement.
The DOJ used a non-prosecution agreement to settle the case and didn’t file charges in court.
Between 2004 and 2010, a Legg Mason subsidiary Permal Group Ltd. partnered with Société Générale “to solicit business from state-owned financial institutions in Libya.”
Paris-based SocGen paid $90 million in bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions.
SocGen settled FCPA offenses earlier Monday. It agreed to pay $585 million in criminal penalties. Half of the penalties will be paid in France.
“In connection with seven of the transactions,” the DOJ said, “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.”
Through Permal, Legg Mason made $31.6 million in profit from the seven investments, the DOJ said.
Legg Mason’s non-prosecution agreement with the DOJ requires the Baltimore-based investment manager to pay $64.2 million for the settlement. That amount includes a criminal penalty of $32.6 million and disgorgement of $31.6 million, the DOJ said.
The disgorgement “will be credited against disgorgement paid to other law enforcement authorities within the first year of the [non-prosecution] agreement,” the DOJ said.
As part of the non-prosecution agreement, Legg Mason agreed to “continue to cooperate” with the DOJ “in any ongoing investigations and prosecutions relating to the conduct, including of individuals.”
The firm also agreed to enhance its compliance program and report to the DOJ about the enhancements.
The DOJ said Legg Mason “did not voluntarily and timely disclose the conduct at issue, but fully cooperated in the investigation and fully remediated.”
Legg Mason’s misconduct involved only mid-to-lower level employees of Permal and “was not pervasive throughout Legg Mason or Permal.”
“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 DOJ said.
The DOJ also said 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.”
The Libya bribery occurred during the regime of Muammar Gaddafi. He was killed in 2011 by Libyan rebels.
Legg Mason bought London-based Permal, a hedge fund manager, in 2005.
In an FCPA disclosure last week, Legg Mason said the Libya investments in question were all terminated by 2012.
In an SEC filing, Legg Mason said:
The matter does not relate to any of our or our affiliates’ current business activities or client relationships and has focused on the actions of former employees of Permal who left that firm four or more years ago.
SocGen’s $585 million resolution Monday is the fifth biggest FCPA case ever.
In 2016, fund manager Och-Ziff settled allegations that during the Qaddafi regime it bribed officials at the Libyan Investment Authority or LIA, Libya’s sovereign wealth fund. Och-Ziff paid $412 million to settle the FCPA offenses in Libya and several other African countries.
The FCPA Blog | June 4, 2018