Goldman Sachs is being investigated by the SEC for possible Foreign Corrupt Practices Act violations.  Persons with knowledge of the investigation say it revolves around Goldman's work with Libya's sovereign-wealth fund, the Libyan Investment Authority ("LIA").

In 2008, Goldman made options trades for the LIA, then controlled by Moammar Gadhafi, which resulted in losses of around $1bn.  Peaking the SEC's interest was a $50mn fee that Goldman agreed to pay to the client so as to help it recoup those losses - something on which Goldman never followed through.  The LIA apparently planned on sending the $50mn to an outside adviser called Palladyne International Asset Management - then run by the son-in-law of the chief of Libya's state-owned oil company. 

The Issue Facing Goldman.   Despite not actually sending the payment, Goldman may still be in violation of U.S. corruption laws, including the FCPA.  Those laws ban companies from paying or offering bribes to foreign-government officials, state-owned company employees or employees of sovereign-wealth funds. 

What the SEC must determine is whether Goldman made the offer as a settlement (for, say, its own trading errors) or as a bribe (heaven forbid!).  Further, should the SEC deem the payment to be a bribe, it will also have to decide whether the matter is worth prosecuting - in that is was brought up, but never actually consummated.   [WSJournal, 8/10/11]