Major US Investment Banks and Hedge Funds Under DOJ Bribery Investigation

Jacob Harper |

The US Department of Justice is currently investigating several major financial institutions on allegations the companies shelled out hundreds of millions in bribes to Libyan officials to curry favorable deals prior to the overthrow of Muammar Ghaddaffi’s regime.

The allegations span several facets of the financial sector. Investment banks Goldman Sachs Group (GS) , JP Morgan Chase and Co. (JPM) and Credit Suisse (CS) have been implicated, as well as private equity firm Blackstone Group (BX) and hedge fund Och-Ziff Capital Management Group. The DOJ alleges the companies violated federal anti-corruption laws by shuffling more than $1 billion into private Libyan investment schemes.



The DOJ investigation is not the first US government inquiry into financial players alleged to have operated in concert with the Ghaddafi regime. Beginning in 2011, the Securities in Exchange began probing Goldman Sachs’ involvement in the Libyan Investment Authority, a fund established in 2006 to help the country manage its sizable oil-generated wealth.

That fund was rife with corruption, and saw its wealth vanish with the 2008 Great Recession, largely thanks to currency bets made at Goldman’s urging. In turn, Goldman offered to pay the LIA a $50 million “fee” in exchange for becoming the majority shareholder and a significant portion of future returns. The SEC contends that the $50 million fee constituted a bribe to indenture the LIA for guaranteed future returns.

Per the 1977 Foreign Corruption Practices Act, US companies are barred from bribing foreign officials. As they manage a nation's sovereign fund, LIA employees are considered by the US to be government officials.

As Ghaddafi’s regime has crumbled, much of the corruption concerning the dealings of Goldman and its ilk and the LIA has come to light. The LIA, while one of the world’s smallest sovereign wealth funds, is still attractive to global investors. The fund represents a turbulent yet oil-rich nation, holds $56 billion in assets, and has outperformed similar Arab sovereign wealth management funds.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BX The Blackstone Group L.P. Representing Limited Par 29.68 -0.21 -0.70 2,618,811 Trade
JPM JP Morgan Chase 87.29 -0.10 -0.11 16,128,083 Trade
GS The Goldman Sachs Group Inc. 228.41 -3.49 -1.51 6,412,758 Trade
BHDB Brotherhood Bncshs Inc 52.00 0.00 0.00 0

Comments

Private Markets

Knightscope

Autonomous security robots providing advanced detection capabilities at $7 per hour - aiming to define the future of security. Help #StopTheViolence.

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…