Legg Mason (LM) will pay $34.5 million to settle charges that its Permal Group hedge fund business bribed Libyan officials to win investment contracts, the Securities and Exchange Commission announced Monday.
The settlement mirrors one announced June 4 by the U.S. Justice Department, with Legg Mason agreeing to pay $64 million including a $32.6 million penalty and $31.6 million disgorgement. The SEC order said that because of that criminal penalty, it was not imposing a civil fine.
The money manager holding company admitted that from 2004 to 2010, Permal was a partner with Societe Generale in seeking business from Libyan state-owned companies and paying bribes through a Libyan broker in connection with 14 investments. In the non-prosecutorial agreement, the Justice Department said Legg Mason cooperated in the federal investigation, and that its misconduct "involved only mid-to-lower-level employees" of Permal.
Societe Generale pleaded guilty in U.S. District Court in New York to bribery charges earlier this year and agreed to pay $292.5 million each to the U.S. and French governments.
In 2016, Legg Mason combined Permal with EnTrust Capital to form EnTrustPermal.
At the time of the DOJ settlement, Legg Mason Chairman and CEO Joseph Sullivan said in a letter to shareholders that the company was working on a settlement with SEC staff.
The SEC order found Legg Mason violated the internal accounting controls provision of the Securities Exchange Act of 1934. The company will disgorge $27.6 million of ill-gotten gains plus $6.9 million in prejudgment interest to settle the SEC's case.
Legg Mason spokeswoman Mary Athridge said the SEC and DOJ settlements combined are less than the $71 million charge posted in the first two quarters of 2018 representing the total estimated liability for the Libya matter. "We do not expect the payment to have any impact on future investment and operations. We are pleased that this matter with the SEC is now concluded," she said in an email.
Charles Cain, chief of the SEC enforcement division's unit on Foreign Corrupt Practices Act violations, said that global companies are responsible for identifying and mitigating the risks of bribery and corruption. "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," Mr. Cain said in a statement.