Societe Generale, Legg Mason Resolve DOJ FCPA Charges

Societe Generale S.A. and Legg Mason, Inc. agreed to resolve FCPA charges tied to bribing Gaddafi-Era Libyan Officials. Society Generale also settled charges stemming from its manipulation of LIBOR. The FCPA resolutions suggest the overall impact of cooperation. Although both cooperated with the Department, neither firm self-reported. Legg Mason, however, fully cooperated, fully remediated and only mid to lower level employees of a subsidiary were involved. In contrast, Society Generale did not fully cooperate and maintained the contact with the corrupt broker.

Society Generale is a global financial services institution based in Paris, France. Together with its subsidiary, SGA Societe Generale Acceptance N.V., the firm agreed to settle charges tied to a multi-year scheme to pay bribes to officials in Libya. Legg Mason, a Maryland based investment management firm, and its subsidiary Permal Group Ltd., also agreed to settle charges tied to its participation in the Libyan bribery scheme with Societe Generale.

Beginning in 2004, and continuing until 2009, Societe Generale agreed to pay bribes through a Libyan broker related to 14 investments made by Libyan state-owned financial institutions. Over the period a total of $90 million in bribes were paid, portions of which were channeled to high-level Libyan officials to secure investments from various Libyan state institutions. The bribes were calculated as a percentage of the deal, typically ranging from 1.5% to 3%. Portions of the bribes were paid to benefit Legg Mason. Society Generale obtained a total of 13 investments and one restructuring loan from various Libyan state institutions valued at over $3.66 billion, yielding profits of $535 million. Legg Mason, through Permal, managed seven of the investments, reaping profits of about $31.6 million.

To resolve the case Society Generale entered into a deferred prosecution agreement tied to a criminal information charging one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of transmitting false commodity reports. Its subsidiary will plead guilty to a one-count criminal information alleging conspiracy to violate the anti-bribery provisions of the FCPA. The financial institution will pay a criminal penalty of $585 million and continue to cooperate with the investigations. The firm will also maintain enhanced compliance procedures. The resolution reflects the firm’s failure to self-report and substantial but not full compliance along with substantial remediation, all of which lead the Department to conclude that a monitor is not necessary. U.S. v. Society Generale (E.D.N.Y.); U.S. v. SGA Societe Generale Acceptance N.V. (E.D.N.Y.).

Legg Mason entered into a non-prosecution agreement, agreeing to pay $64.2 million. That amount is composed of a penalty of $32.625 million and disgorgement of $31.617 million. The amount of the disgorgement will be credited against disgorgement claims of other law enforcement agencies made within the first year of the settlement. The firm will also continue to cooperate and maintain an enhanced compliance program. The settlement reflects the fact that the firm did not self-report but did fully cooperate with the investigation and fully remediated. The misconduct also only involved mid- to lower level employees of the subsidiary while Society Generale maintained the relationship with the Libyan broker.

Finally, in an unrelated matter, Society Generale resolved charges tied to manipulating LIBOR. Specifically, between May 2010 and October 2011 the financial institution engaged in a scheme to deflate LIBOR to make it appear that the firm’s borrowing costs were lower than what was actually paid. The directives for the scheme emanated from senior executives at the firm and had wide impact. In 2006 employees of the firm in London and Tokyo worked together to manipulate the firm’s Japan Yen LIBOR submission. This was done to benefit the trading position of a firm employee. A $275 million fine was paid to resolve the matter.