U.S.-based investment management firm Legg Mason Inc. ("Legg Mason") agreed to disgorge over $34 million in profits and prejudgment interest to settle SEC charges that it violated the Foreign Corrupt Practices Act ("FCPA"). The SEC alleged that Legg Mason lacked sufficient internal accounting controls regarding the firm's use of intermediaries and brokers in foreign markets. In resolving the matter, the SEC acknowledged Legg Mason's (i) cooperation throughout the duration of the investigation and (ii) certain remedial efforts, such as terminating the employees involved in the alleged misconduct and establishing new anti-corruption procedures.

According to the Order, Permal Group Ltd. ("Permal") (a former asset management subsidiary of Legg Mason) partnered with a French financial services company to request business from state-owned financial institutions in Libya. The SEC alleged that the French firm paid bribes through a Libyan intermediary in order to secure 14 investments made by Libyan state-owned financial institutions. For each transaction, the French firm paid the Libyan intermediary a commission of between one-and-a-half and three percent of the amount of the investments made by the Libyan financial institutions. The commissions paid by the French firm substantially benefitted Legg Mason, given that some of the assets in which the Libyan financial institutions invested were placed in funds managed by Permal, allowing Permal to earn fees on them.

Additionally, two Permal employees allegedly continued to use the Libyan intermediary, notwithstanding knowledge that bribes were being paid to Libyan government officials in order to secure investments. The SEC claimed that Legg Mason failed to take proper steps to address the risks of bribery and corruption, particularly the use of middlemen. As a consequence of the scheme, Permal allegedly obtained numerous investments and earned net revenues of approximately $31.6 million.

In connection with the same conduct covered by the SEC settlement, Legg Mason entered into a June 4, 2018 non-prosecution agreement ("NPA") with the DOJ, requiring the firm to pay a criminal penalty of $32.6 million and disgorgement of $31.6 million. The NPA disgorgement amount was to be credited against any disgorgement amounts ultimately paid to the SEC. The SEC also noted in its Order that it did not seek to impose an additional penalty on Legg Mason in light of the criminal penalty already agreed upon with the DOJ.

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