Societe Generale agreed to pay €963 million ($1.05 billion) to settle a legal dispute with the Libyan Investment Authority over alleged bribery, averting a trial and prompting a surprise drop in profit.
The French bank and LIA reached a deal to resolve “all matters between both parties” related to five transactions between 2007 and 2009, SocGen said in a statement on Thursday. The court case, following allegations of corruption and bribery, was scheduled to start in London Thursday. A similar lawsuit against Goldman Sachs Group that dealt with allegations of undue influence instead of bribery was thrown out six months ago.
The bank apologized to the LIA and said it regrets the “lack of caution” of some of its employees, booking a €350 million provision in the first quarter related to the case. The bank reported lower first-quarter profit after the charges, with net income falling to €747 million from €924 million a year earlier. It had been expected to post profit of €863 million, the average estimate of six analysts surveyed by Bloomberg.
The Libyan case hinged on a $58.4 million payment made by Societe Generale to a businessman named Walid Al-Giahmi to secure investment deals. The LIA, which manages Libya's oil profits and has assets of more than $60 billion, sought to claim losses of about $1.5 billion. The group alleged the payment was a bribe, making the trades invalid. The bank had denied wrongdoing, saying the money was for introductory services and market research.
“We vigorously defended the allegations against Mr. Giahmi,” Kathryn Garbett, head of fraud defense at law firm Mishcon de Reya, said in an emailed statement. “This is a complete exoneration of my client.”
The deal allows the French lender's executives to avoid testifying in court about payments that are part of an investigation by the U.S. Department of Justice into whether banks, hedge funds and private equity firms violated anti-bribery laws in Libya. Three senior executives were granted permission to testify behind closed doors, fearing incrimination in that probe, and as many as 50 Libyans had their identities shielded to protect their families back home.
