The US Department of Justice (DOJ) is investigating The Blackstone Group and a handful of other financial firms for potentially violating anti-bribery laws in their dealings with Libya’s sovereign wealth fund, the Wall Street Journal reported, citing people familiar with the matter.
The DOJ’s criminal investigation is proceeding alongside a civil probe by the US Securities and Exchange Commission that began in 2011. The government is looking into deals made around the time of the financial crisis and afterward for potential violations of the Foreign Corrupt Practices Act (FCPA), the paper said.
In addition to The Blackstone Group, federal investigators are examining Goldman Sachs, Credit Suisse, JPMorgan Chase, Societe Generale, and hedge fund Och-Ziff Capital, the Journal said, adding that prosecutors and regulators haven’t accused any of the firms under investigation of any wrongdoing.
The Blackstone Group declined comment. The DOJ said as a matter of general policy, it could neither confirm nor deny the investigation.
The FCPA prohibits firms and individuals from paying bribes to foreign officials, which the law includes to mean state-owned investment funds such as the Libyan Investment Authority. Even the offer of a bribe, despite no transaction being closed, can trigger FCPA violations.
In 2008, The Blackstone Group had some “low-level discussions with the Libyan fund that didn’t lead anywhere”, a person with knowledge of the matter told PE Manager.
At the center of the probe are “fixers” that help connect investment firms with individuals who have ties to leaders in developing markets, including those in late Libyan leader Moammar Gadhafi's network. At no point did the Blackstone Group hire a placement agent or “fixer” to solicit commitments from the Libya fund, the person said.
Blackstone chief Steve Schwarzman created informal ties between the two groups in 2008 when he attended the wedding of Mustafa Zarti, the deputy chief of the Libyan Investment Authority, alongside Carlyle Group chief executive David Rubenstein. The Carlyle Group was reportedly awarded a $118 million investment from the Libyan Investment Authority. Carlyle is not part of the DOJ investigation.