Société Générale and Legg Mason carried out a massive bribery scheme to pay Gaddafi-era government officials in Libya in exchange for large investments by Libya government funds.  In total, Société Générale and Legg Mason paid over $90 million in bribes in exchange for over $3.6 billion in investments and profits of over $500 million.

The Bribery Scheme

In a lengthy factual statement, the government, Société Générale and Legg Mason outlined a bribery scheme carried out from 2004 to 2009.  The Gaddafi government was toppled in 2011.

At the center of bribery scheme was an influential Libyan intermediary who assisted Société Générale and Legg Mason in securing 14 separate investments by various Libyan state-owned financial institutions.  The Libyan intermediary was extremely influential and resided in the United Kingdom and Dubai.  He had significant ties to high-level Libyan government officials.  The Libyan intermediary funnel the commission payments and bribes through a separate company he established in Panama.

For each transaction, the Libyan intermediary charged a commission of between one and a half and three percent of the nominal amount of the investments.  Société Générale officials knew that a portion of the commission expenses was being passed to important Libyan government officials as bribes.  As a direct result of the bribery scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions.

Legg Mason assisted the bribery scheme through its subsidiary, Permal Group Ltd.  Legg Mason was involved in seven of the 14 transactions and earned profits of approximately $31.6 million.

The Libyan intermediary purportedly represented that the large payments charged by him were for “introduction” services.  The Libyan intermediary also was making smaller payments and providing benefits to various Libyan officials, including travel, gifts, hospitality and entertainment.

Société Générale officials used coded language in emails and recorded telephone calls referring to the fact that the Libyan intermediary had “cooked” various Libyan officials, meaning that the Libyan intermediary had control over the official, through bribery and other means.  Société Générale officials also made efforts to disguise the payments and hide them from other Libyan government officials who were unconnected to the scheme.  The Libyan intermediary used threats and intimidation in addition to bribes to control the award of various financial products, because he was known to have a close association with a close relative of Gaddafi.

Over the period of the bribery scheme, Société Générale payed for various employees and Libyan officials to travel to the United States where they held key meetings to plan and conduct the illegal scheme.  They also entertained Libyan officials in New York, often paying for hotels, meals, nightlife and luxury gifts.

In 2009, Société Générale compliance personnel raised questions concerning the commissions being paid to the Libyan intermediary, and specifically that the amount of the commissions was unjustified given the services rendered.  Additionally, the compliance personnel raised concerns that the amounts were being paid through the Libyan intermediary’s Panamanian company and the high-risk nature of Panamanian financial institutions.  Société Générale continued to engage the Libyan intermediary by using a different offshore company and creating a joint venture with the Libyan intermediary.

The LIBOR Scheme

Société Générale admitted to two separate LIBOR manipulation schemes.  The first occurred between May 2010 and October 2011 and involved the deflated submissions of US Dollar rates to create the appearance that Société Générale was able to borrow money at more favorable interest rates than its actual borrowing performance.  As a result, Société Générale falsely presented its creditworthiness to the market.

Senior executives participated and directed the scheme to deflate Société Générale borrowing record.  Several employees within Société Générale submitted altered records and rates at which Société Générale was borrowing.  The false reports influenced financial products worldwide, including interest rate swaps, futures contracts and other derivative products.

In a separate and earlier scheme, in 2006, Société Générale employees in London and Tokyo manipulated Société Générale’s Japan Yen LIBOR submissions.  As a result, Société Générale was able to benefit trading positions and improved the appearance of Société Générale’s Japan Yen trading investments.