Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1.) British banks caught up in Gupta Scandal
This week saw Chancellor Philip Hammond ask the UK’s enforcement agencies to investigate possible ties between South Africa’s Gupta family and British banking groups HSBC and Standard Chartered.
Part of an ongoing corruption inquiry, the Gupta’s are alleged to have used their friendship with President Jacob Zuma to influence state business, including diverting funds from state-owned companies that benefitted them financially.
The concern was first raised by former Labour cabinet minister and anti-apartheid campaigner Peter Hain, that the UK banks might have handled illicit funds linked to the family via Hong Kong and Dubai.
In a letter to the Chancellor, Mr Hain said that the authorities should review transactions due to evidence, including material from whistleblowers, that hundreds of millions of South African rand were laundered out of the country. The case has since been referred to The Financial Conduct Authority, Serious Fraud Office and National Crime Agency.
Although no allegations of wrongdoing was made against the banks, Hain stated that he expected them to help recoup any funds that left the country by illicit means in addressing the House of Lords on the matter on Thursday.
Whilst unable to comment in detail on the nature of client transactions, Standard Chartered confirmed that it closed accounts linked to the Gupta’s after an internal investigation in 2014.
South Africa’s former finance minister Pravin Gordhan said that 72 transactions over a period of four years involving the Gupta’s were marked as suspicious by South Africa’s anti-money laundering watchdog.
South African banks, including Standard Bank and Nedbank, also terminated all their business with Gupta-owned companies in April 2016, although the reasons remain confidential.
The relationship between the Gupta family and President Zuma has also attracted FBI attention, as US investigators have begun investigating individuals, bank accounts and companies potentially linked to the scandal, according to the Financial Times.
In a statement following Hain’s intervention in the House of Lords, Shadow Chancellor John McDonnell called on the government to consider a wide-ranging review into the role of UK financial institutions in global corruption.
“This is the third high-profile money-laundering scandal to involve major British banks this year, and London has become notorious as a global centre for money laundering,” he said
2). Bryan Cave / BLP Merger: What you need to know
Much has been made of the merger talks between Berwin Leighton Paisner and US firm Bryan Cave that emerged this week. With a lot of industry chatter on the proposed tie up, here are the key things you need to know.
- The merger would create a 1,500-lawyer firm with combined revenues of about £730m ($975m) across 32 offices in 12 countries.
- Bryan Cave is the larger of the two partners with 19 domestic offices across the US, alongside European bases in London, Frankfurt, Hamburg, and Paris. This compares to BLP’s 14 offices across Europe, Asia and the Middle East.
- Profit per equity partner (PEP) is comparable between both firms, with BLP’s falling by 8% to £630,000 this year, whilst PEP at Bryan Cave rose to a new high of $865,000 (£650,000).
- Last year saw BLP boost revenues by 7% to reach £272m, while Bryan Cave’s revenue slipped for the third year in a row during 2016, to $608m (£461m).
- If it went ahead, this would be the first transatlantic merger to be brokered between two female managing partners; BLP managing partner Lisa Mayhew and Bryan Cave Chair Therese Pritchard
- The combined firm would be one of the largest in the world to operate under a ‘one firm’ structure sharing a single profit pool, as opposed to a Swiss verein.
- Innovation a common theme unifying both firms for the merger. Bryan Cave boasts a 30-strong team of technologists, pricing professionals and project managers that have helped it twice winthe Innovative Firm of the Year award from the International Legal Technology Association (ILTA), whilst BLP launched Lawyers on Demand (LoD) in 2007, pioneering the use of the flexible lawyering model.
- Bryan Cave’s strong corporate offering is supplemented with expertise in its commercial litigation, employment and environment practices. Although BLP is highly rated for its mid-market M&A work, the firm’s largest and best-known practice is undeniably its real estate group, which accounts for more than a third of the firm’s lawyers.
- Last year, BLP held unsuccessful talks with US firm Greenberg Traurig, a merger which would have created a 2,500 lawyer firm with combined revenue of £1bn.
- In late 2015, Bryan Cave was reportedly in position to acquire struggling US firm Dickstein Shapiro, but the Washington DC-based firm instead pursued another deal with Blank Rome.
With the final decision on the tie up to be made by partner vote later this year, it will be interesting to see if Bryan Cave BLP becomes the latest in the line of big transatlantic mergers.
3). Movers & Shakers
Tom Alabaster, a specialist private equity fund formation lawyer, will join Linklaters investment management group next month.
Goodwin Procter has recruited two Paul Hastings private equity partners in Hong Kong, including former Fried Frank Harris Shriver & Jacobson Asia chief Douglas Freeman.
Linklaters has boosted its New York capital markets practice with the hire of a team from Mayer Brown, led by partner Doug Donahue.
Mergers & Alliances
Office Openings & Closings