Time to Brush Up on the FCPA

Ashby Monk

Goldman Sachs continued its unfortunate streak of negative news this morning:

“U.S. securities regulators are examining whether Goldman Sachs Group, Inc. and other financial firms might have violated bribery laws in dealings with Libya’s sovereign-wealth fund”

Apparently, US regulators are investigating a $50 million “fee” that GS (ostensibly) agreed to pay LIA after the asset manager lost more than a billion dollars of LIA’s money in some risky currency and options trades in 2008. The fee, which was purported to resolve grievances between GS and LIA associated with the losses, was to be paid to LIA but passed on to a small external advisory run by the son-in-law of the director of the state oil company.

Now, to be fair, Goldman never actually paid the “fee”. Violence erupted in Libya and negotiations stalled. And it reportedly stipulated that it would only pay the fee if their attorneys confirmed that it did not violate the US Foreign Corrupt Practices Act (FCPA).

But, according to the WSJ, neither of these points is proof of innocence. For example, the FCPA forbids paying bribes or offering to pay bribes to foreign government officials or employees. (In case you missed it, the SEC recently designated SWF employees as government officials for bribery purposes.) And, apparently, saying that you’re complying with the FCPA doesn’t actually mean you are in compliance with the FCPA.

Whatever the case, it’s time for asset managers to brush up on the FCPA.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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