In a joint effort by the DOJ, CFTC, and French authorities, Société Générale agreed on June 4th to pay penalties and disgorgement in excess of $1 billion arising out of two separate wrongful schemes, making them our Catch of the Week.
First, in connection with alleged violations arising from manipulation of the London InterBank Offered Rate (LIBOR), Société Générale agreed to pay $275 million in a settlement with DOJ and approximately $475 million in regulatory penalties and disgorgement to settle charges filed by the CFTC, making Société Générale the latest financial institution to be face government action in the long-running LIBOR manipulation investigations. Second, Société Générale also agreed to pay $585 million to resolve claims relating to an alleged scheme to pay bribes to officials in Libya.
LIBOR and Euribor are two global benchmarks used to price various types of financial instruments including futures contracts and swap transactions. The LIBOR and Euribor rates are determined daily by a select panel of banks that submit an assessment of the costs of borrowing unsecured funds. Société Générale is alleged to have submitted its assessments based on improper factors.
The CFTC order found that Société Générale made false reports from May 2010 to mid-2012 in its LIBOR and Euribor assessments to create the perception that it was not having difficulty borrowing unsecured funds. These false representations reportedly continued even after the CFTC began investigating LIBOR and Euribor submission practices in 2011. These false reports were made at the direction of various executives including the CFO, Head of Corporate Investment Banking, and various Treasury Managers. In August 2017, two individuals – former Société Générale Global Treasury Head Danielle Sindzingre and former Paris Treasury Head Muriel Bescond – were indicted for their roles in the scheme. Both individuals remain at large.
The FCPA case centered on Société Générale’s payment of over $90 million in bribes to a Libyan “broker” in connection with investments Société Générale made in Libyan state-owned financial institutions. The money paid to the “broker” was then used to pay high-level Libyan officials in the administration of former leader Muammar Gaddafi to secure investments. As a result of the bribes, Société Générale secured multiple investments from Libyan state-owned institutions worth over $3.5 billion, earning Société Générale profits exceeding $500 million. The penalty will be coupled with a guilty plea from SGA Société Générale Acceptance N.V. for conspiracy to violate the anti-bribery provisions of the FCPA in the United States District Court for the Eastern District of New York.
Also on June 4th, the DOJ announced over $64 million in criminal penalties and disgorgement against Legg Mason Inc. for its role in the Libyan bribery scheme. Legg Mason’s subsidiary, Permal Group Ltd., allegedly worked with the Libyan “broker” and benefitted from commissions paid to the “broker” by Société Générale.
In announcing the settlements, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division stated that “today’s resolution – which marks the first coordinated resolution with France in a foreign bribery case – sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law enforcement response.”
Whistleblower rewards are available to qualified individuals – who need not be U.S. citizens – who timely report violations of the Commodity Exchange Act to the CFTC Whistleblower Reward Program or violations of the FCPA to the SEC Whistleblower Reward Program. Whistleblower claims under these programs can be made anonymously, and the involvement of whistleblowers in enforcement actions is not reported by the SEC or CFTC. Regardless of whether there was whistleblower involvement in the investigations that lead to this Catch of the Week, the settlements amply demonstrate the importance of incentivizing insiders to come forward to report misconduct. These enforcement actions should encourage whistleblowers at other large financial institutions to report fraud or misconduct related to the manipulation of benchmarks or bribery of foreign officials.
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