Legg reaches settlement in Libyan bribery probe

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.

“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 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.