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Legg Mason (LM) Settles Libyan Bribery Charges, To Pay $34.5M

Legg MasonLM has agreed to the settlement with the Securities and Exchange Commission (SEC) to pay about $34.5 million for resolution of allegations related to the Libyan bribery case. Per the SEC charges, the company violated the Foreign Corrupt Practices Act (FCPA) in the bribery case.

Moreover, the term "cooking" was used by the middleman for making the Libyan government officials' investments including bribes, per the SEC's order.

"Companies must take adequate steps to identify and mitigate the risks of bribery and corruption present in their global business. Those risks are particularly acute when, as here, agents and middlemen are used as part of a company's efforts to obtain business with government clients," said Charles Cain, chief of the Enforcement Division's FCPA Unit.

Brief on the Fraud

During the period between 2004 and 2010, Legg Mason through its subsidiary, Permal Group Ltd., is said to have partnered with Societe Generale SCGLY in order to obtain business in Libya. Both companies paid bribes through a Libyan broker on the 14 investments made by the government entities, for which a commission of 1.5-3% of the nominal amount of the investments was paid to him.

Of the 14 cases, Legg Mason benefited from seven such transactions, from which it earned profits of about $31.6 million. Middle and lower level employees of Permal are expected to have been involved in the fraud.

Notably, the SEC investigations revealed that two employees of the Legg Mason subsidiary, even though being aware of the bribes by 2006, carried on working with the intermediary.

Settlement Terms

Per the settlement, Legg Mason would pay about $27.6 million as the disgorgement of gains, along with $6.9 million as interest to the SEC, for violating the internal accounting controls provision of the Securities Exchange Act of 1934.

"We do not expect the payment to have any impact on future investment and operations. We are pleased that this matter with the SEC is now concluded," a spokeswoman for Legg Mason noted.

However, spokeswoman for the SEC refrained from commenting on the matter.

This June, Legg Mason also announced a similar settlement with the U.S. Department of Justice ("DOJ") and has agreed to pay about $64 million, which included a $32.6-million penalty and $31.6-million disgorgement. However, per settlement terms, disgorgement of $31.6 million was to be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement.

This Maryland-based investment management firm accrued the aggregate amount of settlements with the DOJ and the SEC to be nearly $71 million.

On the other hand, in June, Societe Generale agreed to pay about $585 million to the French and U.S. authorities to resolve the allegations related to the issue.

Conclusion

Legg Mason's clean image remains at its advantage. Also, it is committed toward improving its performance through inorganic growth strategies. Further, the company's focus on expanding product offerings for its customers bodes well for the long term.

Currently, Legg Mason carries a Zacks Rank #3 (Hold). Shares of the company have lost around 23.7% year to date compared with the 9.4% decline recorded by the industry .

Stocks to Consider

Ameriprise Financial, Inc. AMP has been witnessing upward estimate revisions, for the last 60 days. In the past year, the company's share price has been up more than 4%. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Lazard Ltd LAZ has been witnessing upward estimate revisions, for the last 60 days. Additionally, the stock has climbed nearly 16.2%, in the past year. It currently carries a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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