The Securities and Exchange Commission (SEC) reportedly is looking into allegations that some of the nation’s largest banks, including Citigroup, and well-known private-equity firms such as Blackstone Group may have violated bribery laws in connection with sovereign-wealth funds.
Sovereign wealth funds are giant multi-billion dollar funds run by foreign governments like China that invest in companies and countries, including the U.S.
Sweeping probe
According to The Wall Street Journal, people familiar with the matter say the SEC has sent letters of inquiry to as many as 10 companies in the past week asking about their dealings with sovereign wealth funds without specifically mentioning any allegations of bribery.
The Journal article indicated the paper had spoken to attorneys who are familiar with past investigations into what is known as the Foreign Corrupt Practices Act (FCPA) and that they believe the SEC letters appear to be tied to a broad FCPA investigation of the banking industry.
The article also cited legal experts who said any foreign employee who worked on sovereign wealth funds would be considered government officials and covered by the FCPA.
Over the past several years, the Journal says there has been a wave of investments by sovereign-wealth funds in U.S. financial companies including Citigroup, Merrill Lynch, (before its acquisition by Bank of America) and Morgan Stanley.
Staying mum
The SEC has refused to comment on the report and the Journal admitted that the focus of the inquiry could not be determined or verified. The paper did say that previous FCPA inquiries involved bribes paid to foreign-government officials or employees of state-owned companies to gain a business advantage and that those alleged bribes could involve cash and non-monetary gifts such as entertainment and travel.
Simeon Kriesberg, a lawyer who works on FCPA issues in the Washington, D.C., office of Mayer Brown, told the Journal, “Those financial institutions that have in place effective FCPA compliance programs presumably are already addressing their FCPA risks. Those that do not have compliance programs in place may get a rude awakening."
In a separate report filed earlier in the week and posted on the MainJustice.com Website, two people familiar with the SEC inquiry said the letters sent to the financial firms were similar to requests for information sent to pharmaceutical companies in an FCPA investigation.
