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In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank

 
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Daniel S. Och
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SEC Civil
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September 29, 2016
:
In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank
:
In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (2016)
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The SEC’s case against Daniel S. Och marks one of the first instances the SEC has successfully pursued charges against a high ranking officer within a financial institution for violations of the FCPA.
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Financial Services/Financial Institutions
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Chad, Libya, Niger
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2007; 2008; 2009; 2010; 2011
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Unnamed government officials from Chad, the Democratic Republic of the Congo, Guinea, Libya, and Niger.
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Daniel S. Och (“Och”) is a U.S. citizen, resident of New York, and is the founder, CEO, and Chairman of the Board of Och-Ziff Capital Management Group LLC (“Och-Ziff”), a New York-based hedge fund. Och-Ziff maintains a class of common stock that is registered with the SEC and is traded on the New York Stock Exchange. Och is also an officer and partner of OZ Management LP (“OZ Management”), a registered investment adviser and subsidiary of Och-Ziff.

According to the SEC, between approximately 2007 and 2011, Och-Ziff entered into a series of transactions and investments in which Och-Ziff paid bribes, through intermediaries, agents, and business partners to high ranking government officials in multiple African countries including Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo (“DRC”). The bribes were allegedly paid with the specific knowledge of a senior Och-Ziff employee, but the SEC claims that other Och-Ziff executives ignored red-flags and corruption risks to permit the transactions to proceed. A summary of the alleged transactions is provided below.

• In 2007, Och-Ziff secured a $300 million investment from the Libyan Investment Authority after allegedly paying bribes worth more than $3 million to Libyan government officials through a local agent.

• In 2007, Och-Ziff allegedly used $400,000 to pay a “deal fee” to a local Libyan agent despite being aware that of the high probability that some of those funds would be used as bribes to benefit a Libyan property development project into which Och-Ziff had invested $40 million.

• In 2007 and 2008, Och-Ziff allegedly loaned more than $86 million to a South African partner despite being aware of the high probability that at least a portion of those funds would be used to bribe foreign officials in Chad and Niger in exchange for mining rights in those countries.

• In 2008, Och-Ziff allegedly provided a $124 million loan to an entity affiliated with an Israeli businessman to purchase mining assets in the DRC. According to the SEC, with the knowledge of certain Och-Ziff employees, a significant portion of the loan was allegedly used to bribe high ranking DRC officials to secure mining assets for the Israeli businessman.

• In 2010 and 2011, Och-Ziff loaned the Israeli businessman $130 million, of which, $84.1 million was allegedly provided without and restrictions or oversight by Och-Ziff. According to the SEC, Och-Ziff employees knew that the Israeli businessman would use a portion of the funds to pay bribes to high ranking DRC government officials.

• In 2011, Och-Ziff allegedly purchased shares in a London-based oil exploration company from a South African partner to provide the South African partner with capital for other purposes. The SEC claims that the South African partner paid more than $1 million of those funds to a local consultant who then used the funds to bribe government officials in Guinea. According to the SEC, Och-Ziff failed to conduct sufficient due diligence on the use of those funds to prevent the payment of bribes.

The SEC claims that Och, as Och-Ziff’s CEO, had final decision-making authority on all private investments by Och-Ziff, including the transactions described above. Och allegedly approved the expenditure of funds in two transactions with the Israeli businessman in the DRC in which bribes were paid. The SEC asserts that Och was aware of the high risk of corruption in the transactions involving the Israeli businessman in light of his reputation and connections to high level DRC government officials but nevertheless approved the transactions. According to the SEC, although Och did not know that bribes would be paid, Och caused Och-Ziff to improperly record the transactions on the company’s book and records.

On September 29, 2016, the SEC announced that it had resolved its enforcement action against Och for violations of the FCPA’s books-and-records provision. Och-Ziff, OZ Management, and Och-Ziff’s CFO, Joel M. Frank, were also named in the SEC’s action. According to the SEC’s order, Och would be required to pay a total penalty of $2,173,718. The DOJ and SEC separately required Och-Ziff and OZ Management to pay a combined criminal and civil sanction of $412,100,856.
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Books and records (Individual)
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Cease and Desist, Disgorgement, Prejudgment Interest
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Och was ordered to pay disgorgement of $1,900,000 and prejudgment interest of $273,718.
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2,173,718
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0
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Agent of Issuer, Domestic Concern, Employee of Domestic Concern, Employee of Issuer, Officer of Domestic Concern, Officer of Issuer
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Board Chairman, CEO, Founder
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U.S.
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United States
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Contract Procurement/Retention, Other Business Advantage
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Not stated.
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Wire/check
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Customs Broker or Agent/Consultant, Joint Venture, Sales Agent/Consultant, Subsidiary Company
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Not stated.
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Chad, Libya, Niger
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No
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No
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Cyprus, Niger, Switzerland, United Kingdom