Baltimore-based Legg Mason will pay $34 million to resolve charges relating to the bribery of Libyan officials in the regime of Moammar Al Qaddafi.
The SEC accepted Legg Mason’s settlement and a previously standing non-prosecution agreement in an administrative proceeding on Monday.
According to the SEC’s complaint, a former Legg Mason asset management subsidiary, Permal Group, solicited investment business from Libyan state-owned institutions in partnership with a French financial services company and bank, Societe Generale.
The SEC alleges that between 2004 and 2010, the firms engaged in schemes to pay bribes to Libyan officials through a middleman to secure 14 investments, resulting in business tied to $1 billion in investments providing about $31.6 million in revenue for for Legg Mason through commissions ranging between 1.5 percent and 3 percent.
The SEC also alleges that Legg Mason lacked adequate internal accounting controls to oversee its use of intermediaries, like introducing brokers in emerging markets.
In a parallel Justice Department investigation that Legg Mason settled without prosecution earlier this year, Societe Generale was found to have maintained the relationship with the Libyan middleman and to be the leader of the bribery scheme. The firm agreed to pay $64 million to settle the Justice Department’s claims, including $33 million in penalties, while Societe Generale pleaded guilty in U.S. District Court to bribery charges and was ordered to pay more than $480 million to the U.S. and French governments.
Legg Mason was charged with violating the Foreign Corrupt Practices Act and with violations of the Exchange Act related to its lack of internal accounting controls. The SEC noted that Legg Mason had made extensive efforts to cooperate with its investigators and to conduct remediation, including replacing employees involved in the violations, increasing its compliance staff, adding a new anti-corruption officer position and enhancing its internal accounting controls.
In resolving the charges, Legg Mason will pay $27.6 million in disgorgement plus $6.9 million in pre-judgment interest. Since Legg Mason had previously agreed to pay $33 million in sanctions to the U.S. Department of Justice due to its involvement in the scheme, the SEC declined to impose a civil penalty.