The case is about a corruption scandal in which Legg Mason was involved and was charged hefty fines for violating the Foreign Corrupt Practices Act (FCPA). In the case, it was determined that between the year 2004 and 2010, Legg Mason Inc through its asset management subsidiary, Permal Group Inc collaborated with French company and paid bribes to Libyan government to secure investments worth $1 billion in the Libyan state-owned financial institutions. In return, the company obtained net revenues worth approximately $31.6 million. After investigations, the Legg Mason Inc was found guilty of violating FCPA rules and had to disgorge a sum of approximately $27.6million and pay an extra $6.9million in prejudgment interest. The company had initially agreed to pay approximately $33million to the United States department of justice.
Strategies to Avoid FCPA Violations
Legg Mason could have adopted programs that included hiring a legal expert who would help establish the guidelines and requirements of FCPA. The expert would then train and explain the requirements to all the company representatives who transact foreign business on behalf of Legg Mason. The expert could also keep records of all individuals who underwent training and the level of success of the training. The programs should involve employees signing annual statements that indicate that they understand the requirements of FCPA.
Immediately officials at Legg Mason learned of the misconduct, they should have reported the matter to SEC. Self-reporting makes SEC lenient with the company since it helps the SEC to establish and investigate the issue more quickly. Self-reporting and cooperating with Sec would have resulted in benefits such as reduced charges, non-prosecution, and even deferred prosecution arrangements.
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