Monday, December 16, 2019
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Home » Libya » Joint Communique on Libya

Libya fund accuses Societe Generale of fraud

French bank Societe Generale paid a middleman $58 million in alleged bribes to secure almost $2 billion in business from Libya’s main sovereign-wealth fund during the final years of dictator Moammar Gadhafi’s rule, according to a lawsuit filed by the fund, the Libyan Investment Authority.

The fund is suing Societe Generale in London for restitution of money lost in deals completed between 2007 and 2009. It accuses the French bank of defrauding the institution through a series of complex financial derivative deals that were unprofitable for the LIA, according to new court documents filed last week. The new documents detail allegations in a suit filed earlier this month at London’s High Court.

The French bank denied the allegations. “Societe Generale contests these unfounded allegations,” said a spokeswoman for the bank.

Allegations by Libyan officials that Societe Generale paid bribes to secure business in Libya were first reported by The Wall Street Journal in 2011 as part of a series of articles that described how Western banks and companies such as Goldman Sachs raced to enter the lucrative and largely untapped Libyan financial markets in the late 2000s.

Reporting by The Wall Street Journal at that time prompted the Securities and Exchange Commission to open investigations of Goldman and Societe Generale and their Libyan investment deals. Those investigations continue.

Goldman has denied wrongdoing.

In the London suit, the LIA is seeking to nullify the Societe Generale deals, which were originally worth $1.8 billion but which had lost roughly half of their value by the time the Libyan revolution broke out in February 2013.

The Paris-based lender is France’s third-largest listed bank by assets. It posted net profit of €322 million ($439.17 million) in the three months ended in December, compared with a €471 million loss a year ago.

The court documents filed last week and reviewed by The Wall Street Journal allege that Societe Generale paid $58.5 million to a Panamanian-registered company called Leinada, which was controlled by Libyan businessman Walid Giahmi. The lawsuit alleges that Giahmi was close to the Gadhafi family and personally benefited from the investments made with the LIA.

Giahmi couldn’t be reached for comment. His lawyer in Dubai, where Giahmi resides, called the bribery accusations “completely false.”

Previously, Giahmi said he was innocent of any wrongdoing related to his work in Libya. Lawyers for Giahmi told The Wall Street Journal previously that Leinada was never used to transfer money to a Libyan politician, public official or person connected to the previous regime.

Previously, the French bank declined to comment on its relationship with Leinada or on its ties to the LIA, but it did say that Societe Generale “works occasionally with financial intermediaries in countries where [it] does not have local teams in place.” Those middlemen are “fully reviewed through our compliance procedures in respect of the regulations and in complete transparency with the client,” Societe Generale added. The bank said it “complies with all applicable rules and regulations” related to sovereign-wealth funds.

During Col. Gadhafi’s reign, it was common for international companies to pay intermediaries, advisers or consultants when doing business with Libya, companies and diplomats have said. US and UK securities laws require investment firms to disclose payments to brokers or middlemen who work as matchmakers on deals.

The court documents filed in London describe the payments made to Leinada as bribes, citing as evidence the fact that neither Giahmi nor Leinada had any known expertise in financial consulting or financial restructuring and the payments offered no discernible value for either Societe Generale or the LIA.

The documents also allege that the scale of the remuneration to Leinada was never detailed in the contract documentation between Societe Generale and the LIA.

The Wall Street Journal reported in February that Societe Generale is among a group of large investment firms that remains under scrutiny by the SEC and the Justice Department in connection with their dealings with the LIA. The joint civil and criminal investigation is examining whether the firms may have violated U.S. anti-bribery laws by engaging with intermediaries, formally known as placement agents or finders, to help them obtain investments from the Libyan sovereign-wealth fund. The investigation is focused on whether payments may have been funnelled to Libyan officials through these intermediaries, people familiar with the matter have said.

Giahmi is one of the middlemen whose activities US investigators are scrutinizing, said people familiar with the matter. Giahmi’s lawyer said his client is aware of the SEC investigation and has offered to cooperate with US officials.

Financial News

Categories: Libya, News, Press

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