Sunday, November 28, 2021

SEC fines Legg Mason funds for Libyan bribery scheme

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Federal regulators slapped fund giant Legg Mason with a $32.6 million fine for “paying bribes” to Libyan officials under dictator Muammar Gaddafi — the latest Wall Street firm ensnared in a probe into bribes of the terrorist regime.

In the complex scheme, bankers for a Legg Mason subsidiary paid $26.5 million in bribes to the Libyan official between 2004 and 2010 so the country would buy bonds issued by French bank Societe Generale — which Legg Mason then managed and collected fees on, according to the settlement.

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Legg Mason bankers took steps to conceal the bribes by speaking in code about the transactions with an official working for Gaddafi, who died in 2011, according to a Monday settlement with the Securities and Exchange Commission.

“I cooked him,” one unnamed banker told another in a recorded phone call, according to the SEC’s order. “Only we have to go there, start the fire, have a barbecue.”

The Libyan funds bought $950 million worth of the bonds over the six-year period, including those linked to the Legg Mason subsidiary, called Permal, the SEC said.

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“Companies must take adequate steps to identify and mitigate the risks of bribery and corruption,” said Charles Cain, the SEC’s chief of enforcement in the division handling the Foreign Corrupt Practices Act. “Those risks are particularly acute when, as here, agents and middlemen are used as part of a company’s efforts to obtain business with government clients.”

The order follows a $585 million settlement in June with SocGen, which was caught paying $90 million in bribes to Libyan officials to secure $3.6 billion in investments.

Libya had also accused Goldman Sachs in a London civil suit of taking advantage of its employees to win business — including plying them with prostitutes — but lost $1.2 billion in the process.

In 2016, a London judge ruled in Goldman’s favor, saying that the bank didn’t mislead the fund. The banker at the center of that case, Youssef Kabbaj, has said he never provided “improper entertainment” to any officials there.

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Monday’s $32 million settlement against Legg Mason is less than half of what the company estimated its liability would be from the second quarter, Darrell Oliver, a spokesman for Legg Mason, said in a statement.

“We are pleased that this matter with the SEC is now concluded,” Oliver said.

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