The Securities and Exchange Commission (SEC) is looking into Goldman Sachs’ relationships with the Libyan Investment Authority. Back in 2007, Libyan leader Moammar Gadhafi attracted banks and securities firms when he launched the $40 billion fund.

SEC officials are looking into, among other things, a $50 million fee Goldman agreed to pay the Libyan Investment Fund as part of a plan to help the fund recoup losses.

Although the fee was never paid, the money was to be passed on to Palladyne International Asset Management BV, an entity run by the son-in-law of the head of Libya’s state-owned oil company. Negotiations stalled before the violence in Libya broke out and payment never actually took place.

While no formal investigation has been launched, the SEC has made inquiries. It would not be surprising to see this develop into a formal investigation. Given the federal government’s new found appreciation for enforcing the Foreign Corrupt Practices Act of 1977 (FCPA), it seems likely that the SEC will attempt to determine whether the $50 million fee Goldman agreed to pay can be construed as a bribe made to a foreign government official or employee of a state-owned company.

The FCPA, as amended, 15 U.S.C. 78dd-1, et seq., makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA accomplishes this in two distinct ways:

(1) Prohibiting the payment of anything of value to officials of foreign governments (the “anti-bribery” provision); and
(2) Requiring accurate accounts and effective internal accounting controls (the “books and records” provisions).

Given the fact that the $50 million payment was not made, there will likely not be a “books and records” violation. However, the FCPA does make it unlawful to “promise to pay . . . or . . . promise to give . . . anything of value.” Stated plainly, a promised or attempted bribery of foreign government officials is unlawful under the “anti-bribery” provision of the FCPA. All Goldman can do at the moment is comply with the inquiries and its own document retention policies and hope that the government does not pursue a full investigation. Once a full investigation begins, Goldman will have to be careful not to get caught up in any of the “cover up” crimes like obstruction of justice and false statements. Additionally, federal prosecutors have not been shy about utilizing their full arsenal of tools to obtain convictions from entities it thinks have done something wrong. For example, federal prosecutors today coordinate their investigations with a very diverse group of regulatory and enforcement agencies.

This is why every U.S. person engaged in international trade must remain vigilant on many legal fronts. It is not uncommon to have multiple U.S. regulatory and statutory regimes simultaneously in play at any given moment. For example, any investigation into Goldman for their activities with Libya will not only implicate the SEC, but also the Department of Justice, the Department of Treasury Office of Foreign Assets Control, and possibly the Department of Commerce. The tools available to the government to coerce convictions are plentiful.

The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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