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Societe Generale Resolves Net $293 Million FCPA Enforcement Action Concerning Conduct In Libya That Occurred 9-14 Years Ago


Earlier today, the DOJ announced that “Société Générale S.A. (SoGen), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V. (“SGA”) agreed to resolve a Foreign Corrupt Practices Act enforcement action “relating to a multi-year scheme to pay bribes to officials in Libya.” As indicated in the DOJ release and confirmed by a DOJ representative, the net FCPA settlement amount is $293 million after crediting $293 million for a related French law enforcement action.

In addition, the DOJ announced that Société Générale agreed to pay $275 million for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR).

The DOJ FCPA enforcement action involved this criminal information against SGA charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through this plea agreement and this criminal information against SoGen charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through this deferred prosecution agreement. After accounting for an offset of approximately $293 million for penalties paid to French law enforcement in connection with the resolution of a parallel case concerning the same core conduct, the net FCPA settlement amount is approximately $293 million.

Both criminal informations involve the same alleged core conduct.

“Between in or about 2005 and in or about 2011, following the lifting of broad economic sanctions, the Libyan State Agencies sought to place substantial funds with financial institutions for investment purposes. These placements were heavily sought after by a number of financial institutions, including Societe Generale, as well as at least eight U.S.-based financial institutions. By at least 2006, several Societe Generale employees, together with their co-conspirators, knew that the Libyan Intermediary was paying bribes and providing other improper financial benefits to Libyan government officials in order to secure financial investments for Societe Generale, SGA, and others and agreed to continue to use the Libyan Intermediary despite that knowledge. In providing bribes and other improper benefits on Societe Generale’s and SGA’s behalf, and taking other acts in furtherance thereof, the Libyan Intermediary acted as an “agent” of Societe Generale and SGA as that term is understood under U.S. law. The Societe Generale employees also concealed the bribes through payments to the Libyan Intermediary for purported “introduction” services.

During this time period, Societe Generale, usually through the defendant SGA and in partnership with the Investment Management Firm, sold the Libyan State Agencies 13 structured notes (and one restructuring) worth a total of approximately $3.66 billion. SGA issued nine of the structured notes that Societe Generale sold to the Libyan State Agencies. SGA relied upon Societe Generale and its employees and agents to market the notes that SGA issued and that ultimately Societe Generale sold to the Libyan State Agencies. Societe Generale earned profits of approximately $523 million in connection with these deals. For each transaction, Societe Generale paid the Libyan Intermediary’s Panamanian Company a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan State Agencies. In total, Societe Generale paid the Libyan Intermediary approximately $90.74 million from approximately 2005 to 2009 for supposed “introductory” services.”

Both informations invoke the dd-3 prong of the FCPA (added to the statute in 1998) that has the following jurisdictional element: “while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an” improper payment scheme.

Both information contain the following two relevant allegations:

“On or about April 28, 2008, Societe Generale sent a wire transfer of approximately SI 9.8 million through its New York branch to the Panamanian Company’s account at Societe Generale in Zurich, Switzerland.

On or about May 9, 2008, a Societe Generale employee and the Libyan Intermediary traveled to New York City through John F. Kennedy International Airport to meet with a Libyan official. While in New York, the Societe Generale employee discussed several potential transactions with the Libyan official. The Societe Generale employee also provided the Libyan official and the Libyan Intermediary with multiple days of entertainment in New York.”

The SGA plea agreement sets forth an advisory fine range of $313.7 million – $627.4 million. Based on SoGen’s DPA (described below), the DOJ stated that a $500,000 fine should be imposed on SGA.

The three year DPA is based on the following relevant considerations:

“a. the Company did not receive voluntary disclosure credit because it did not voluntarily and timely disclose …;

b. the Company received substantial credit for its cooperation with the Office’s investigation of the underlying FCPA conduct, including: (i) conducting a thorough and robust internal investigation; (ii) collecting and producing voluminous evidence located in other countries to the full extent permitted under applicable laws and regulations; and (iii) providing frequent and regular updates to the Offices as to the status of and facts learned during the Company’s internal investigation in a manner that both complied with applicable laws and regulations and satisfied the Office’s need to obtain this information in a timely manner. The Company did not receive full credit for its cooperation because of issues that resulted in a delay during the early stages of the investigation, which led the Offices, without the assistance of the Company, to develop significant independent evidence of the Company’s misconduct …;

c. as part of the Agreement, the Company’s wholly-owned subsidiary SGA is pleading guilty … to one count of conspiracy;

d. the Company engaged in remedial measures, including: (i) separating from employees who participated in, or who had knowledge of, the misconduct …; (ii) creating a new anti-bribery and corruption compliance program for the Company, specifically addressing the use of third-party intermediaries by the relevant business unit; and (iii) enhancing anti-corruption training for all management and relevant employees;

e. the Company provided to the Offices all relevant facts known to it, including information about the individuals involved in the conduct described in the FCPA portion of the Statement of Facts, to the full extent permitted under applicable laws and regulations;

f. the Company has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C [of the DPA];

g. based on the Company’s remediation and state of its compliance program, and the Company’s agreement to report to the Offices as set forth in Attachment D [of the DPA], the Offices determined that an independent compliance monitor was unnecessary;

h. the nature and seriousness of the offense conduct, including, among other things: (i) the lengthy timespan of the conduct; (ii) the high dollar value of the bribes paid and the resulting illicit gains; (iii) the bribes were paid in a high-risk jurisdiction; and (iv) the nature of the misconduct, including that high-level employees within a business unit of the Company’s investment bank were aware of, involved in, or willfully ignorant of the misconduct …;

i. the Company settled a civil dispute with the Libyan Investment Authority (LIA) concerning certain of the allegations described in the FCPA portion of the Statement of Facts and, in connection with the settlement, the Company made a payment of approximately $1.1 billion to the LIA;

j. the Company has agreed to enter into a criminal resolution with the Parquet National Financier (PNF) concerning the allegations described in the FCPA portion of the Statement of Facts and has agreed to pay a criminal penalty in the amount of $292,776,444 to the PNF;

k. the Company has continued to cooperate with the Offices’ ongoing investigation of individuals and other companies …”.

With respect to the FCPA conduct, the DPA sets forth an advisory guidelines range of $731.9 million to $1.46 billion and states: “The Company agrees to pay a total monetary penalty for the FCPA conduct in the amount of $585,552,888 (the FCPA Total Criminal Penalty), $500,000 of which will be paid as a criminal fine on behalf of SGA. […] The FCPA Total Criminal Penalty will be offset by up to $292,776,444 for any penalties paid to the PNF in connection with the resolution of a parallel case concerning the allegations described in the FCPA portion of the Statement of Facts.

According to the DPA, in September 2011 the Company learned that a newspaper was preparing a report on the Panamanian Company’s relationship with the Company.

According to the DOJ release:

“According to the companies’ admissions, between 2004 and 2009, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions.  For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions.  In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale.  As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million.

Société Générale will enter into a deferred prosecution agreement in connection with a criminal information charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of transmitting false commodities reports.  Additionally, Société Générale’s subsidiary, SGA Société Générale Acceptance N.V., will plead guilty to a one-count criminal information filed today in the Eastern District of New York charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA.  Pursuant to its agreement with the Department, Société Générale agreed to pay a total criminal penalty of $585 million to the Department.  Société Générale also agreed to continue to cooperate with the Department’s investigation and adopt and maintain enhanced compliance procedures.

The Department entered into this resolution in part due to Société Générale’s failure to voluntarily self-disclose the companies’ misconduct to the Department; the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials; the company’s substantial, though not full, cooperation with the Department; and the company’s significant remediation which, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption, resulted in the Department determining that a monitor was not necessary in this case.”

Acting Assistant Attorney General John Cronan of the Justice Department’s Criminal Division stated:

“For years, Société Générale undermined the integrity of global markets and foreign institutions by issuing false financial data and by fraudulently securing contracts through bribery. 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.”

U.S. Attorney Richard Donoghue of the Eastern District of New York stated:

“The resolution announced today by the Department with Societe Generale and a subsidiary, which includes a guilty plea, admissions of wrongdoing, significant corrective measures and hundreds of millions of dollars in penalties, sends a powerful message to financial institutions that engage in corruption and manipulation in the financial markets that they will be held accountable. The United States will vigorously protect the integrity of financial markets by holding responsible to the full extent of the law those banks, corporations and individuals who seek to corrupt government officials to enrich themselves.”

Special Agent in Charge Matthew DeSarno of the FBI Washington Field Office’s Criminal Division stated:

“Today’s resolution demonstrates that fraudulently manipulating LIBOR and deceiving the financial market has severe consequences, and the FBI will not tolerate this type of criminal activity. The FBI remains committed to holding institutions accountable for their actions in breaking the law and manipulating the global benchmark interest rate. The personnel of the FBI Washington Field Office have dedicated significant time and resources to investigating complex financial fraud schemes such as this one, and I want to thank them for their tireless efforts as well as our colleagues at the Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York for their hard work.”

Deputy Chief Eric Hylton of IRS Criminal Investigation stated:

“Today’s announcement resulted from the unraveling of international financial transactions orchestrated by Société Générale and its agents to facilitate illegal payments to foreign government officials in Libya. IRS-CI is a trusted partner in pursuit of those who use pervasive bribery schemes to circumvent the law. We are committed to maintaining fair competition, free of corrupt practices, through global teamwork and our robust financial investigative talents.”

In this release, Frédéric Oudéa (CEO of Societe Generale) stated:

“We regret these past misconducts, which are contrary to our values and ethical standards that led to these settlements.  We are pleased to have resolved these matters in cooperation with the relevant authorities and we believe it is an important step for the Bank. Over the past years, we have already taken extensive steps, at our own initiative, to strengthen our global compliance and control framework to meet the highest standards of compliance and ethics.  Anchoring a culture of responsibility, shared by all our staff members, is a priority at the heart of our strategic plan Transform to Grow.  Societe Generale’s teams are fully committed to delivering on all the key objectives of the plan and act every day to serve our clients and deserve the trust of our all stakeholders”.

Keith Krakaur and Charles Walker (Skadden) and Sean Hecker (Debevoise) represented the companies.

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