June 05–Legg Mason said Monday it has settled a U.S. probe of an affiliate that managed investments for the Libyan government during the rule of Muammar el-Qaddafi.
The head of the Baltimore-based money management firm announced the settlement with the U.S. Department of Justice in a letter to shareholders. The firm expects to reach a separate settlement soon with the U.S. Securities and Exchange Commission.
The firm had said last week it expects to pay $67 million as part of the settlement. Legg revised that figure Monday to $71 million to cover financial penalties and other costs.
The foreign corruption investigation involved activities of two mid-to-lower level foreign-based employees at Legg’s Permal hedge fund business more than a decade ago, Legg Chairman and CEO Joseph A. Sullivan said.
Legg Mason expects to pay $67 million to settle a U.S. probe of one of its affiliates that managed investments for the Libyan government during the rule of Muammar el-Qaddafi.
The Baltimore-based money management firm is negotiating with the U.S. Department of Justice and the Securities and Exchange…
“Having spent close to seven years cooperating fully with the government’s inquiries, we are pleased to put the U.S. Department of Justice portion of this matter behind us and move forward,” Sullivan said “However, let me be very clear: the misconduct by former employees of the legacy Permal business that the government found was totally unacceptable.”
The employees paid bribes in return for Libyan government investments in a third party financial institution’s products, Legg Mason said in the letter. Permal provided investment advisory services to the funds.
Legg acquired Permal in 2005. In May 2016, it merged the hedge fund platform with New York-city based Enrust Capital, investing about $400 million in the hedge fund manager to create EnTrust Permal. EnTrust was not part of the investigation.
The probe under the Foreign Corrupt Practices Act prompted Legg to strengthen its anti-corruption oversight and compliance policies, Sullivan said. Enacted in 1997, the law prohibits bribes of foreign officials to obtain business.
The government agreed to not criminally prosecute Legg because it cooperated with investigators, took steps to enhance its compliance program and agreed to pay back $31 million in net revenues from the Permal business, the company said.
“Legg Mason and each of our nine diverse, independent affiliate companies expect to conduct business and serve our investor clients each and every day with complete integrity,” Sullivan said.
In the scheme uncovered by investigators, bribes to Libyan officials or their family members were paid by an intermediary — someone who passed along money that was received from the unaffiliated financial institution — to bring in business for that institution and Permal.
Permal acted as a sub-adviser of several products sold by the third party institution. Investments were made from 2005 to 2007 and closed no later than 2012. Qaddafi’s government fell in the Arab Spring of 2011, and he was killed later that year.
Legg has appointed an anti-corruption officer who oversees the firm’s anti-corruption program.
This article provided by NewsEdge.