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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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Joel M. Frank
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SEC Civil
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September 29, 2016
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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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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 Joel M. Frank 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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Joel M. Frank is a U.S. citizen, resident of New York, and the CFO for 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. Frank is also the CFO as well as an officer and partner in OZ Management LP, 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 Frank, as Och-Ziff’s CFO, was responsible for maintaining the accuracy of Och-Ziff’s books and records and for devising and maintaining Och-Ziff’s system of internal accounting controls. Frank allegedly approved the expenditure of Och-Ziff funds in which bribes or other improper payments were made. According to the SEC, Frank 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 Frank did not know that bribes would be paid, Frank was responsible for improperly recording the transactions on Och-Ziff’s book and records and for failing to maintain a system of adequate internal controls in connection with the transactions involving Libya and the DRC.

On September 29, 2016, the SEC announced that it had resolved its enforcement action against Frank for violations of the FCPA’s books-and-records and internal controls provisions. Och-Ziff, OZ Management, and Och-Ziff’s Founder, CEO, and Chairman of the Board, Daniel S. Och, were also named in the SEC’s action. According to the SEC’s order, Frank would not be required to pay a monetary penalty but would be ordered to refrain from committing or causing any violations or future violations Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. 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), Internal Controls (Individual)
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Cease and Desist
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Frank was not required to pay a monetary penalty in connection with the SEC’s order.
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Not stated.
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0
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Agent of Domestic Concern, Agent of Issuer, Employee of Domestic Concern, Employee of Issuer
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CFO
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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, Malta, Switzerland, United Kingdom