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U.S. v. Och-Ziff Capital Management Group LLC

 
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Och-Ziff Capital Management Group LLC
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DOJ Criminal
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September 29, 2016
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U.S. v. Och-Ziff Capital Management Group LLC
:
U.S. v. Och-Ziff Capital Management Group LLC, No. 16-516 (E.D.N.Y 2016)
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The DOJ’s case against Och-Ziff (along with the SEC’s parallel enforcement action) is the first time a hedge fund has been found liable for violations of the FCPA and is the most significant FCPA enforcement action against a financial institution to date.
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Financial Services/Financial Institutions
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Chad, Libya, Niger
:
2007; 2008; 2009; 2010; 2011; 2012; 2013
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Senior officials in the Democratic Republic of the Congo; Ambassador-at-Large and national parliamentarian of the Democratic Republic of the Congo; Unnamed individual from Libya that conducted high-profile foreign and domestic affairs on behalf of the Libyan government and influenced the decisions of the Libyan sovereign wealth fund; Unnamed high-ranking Libyan government official; Unnamed high-ranking official at the Libyan sovereign wealth fund.
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Och-Ziff Capital Management Group LLC (“Och-Ziff”) is a Delaware limited liability company and one of the largest alternative asset and hedge fund managers in the world. Och-Ziff has its headquarters in New York and maintains a class of common stock that is listed on the New York Stock Exchange. Those securities are registered with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934. Och-Ziff controls numerous consolidated subsidiaries and affiliates though which it operates and provides investment advisory and management services to Och-Ziff investor funds in return for management fees and incentive income.

According to the DOJ, from approximately 2007 until 2013, Och-Ziff engaged in a series of bribery schemes involving officials from the Democratic Republic of the Congo (“DRC”), Libya, and other African countries. Those schemes are described in greater detail below.

Democratic Republic of Congo

From approximately 2005 until 2015, an unnamed Israeli businessman (“DRC Partner”) with significant diamond and mining interests in the Democratic Republic of the Congo allegedly paid more than $100 million in bribes to DRC officials to obtain special access to and preferential prices for opportunities in the government-controlled mining sector. Beginning in 2007, Och-Ziff employees allegedly initiated discussions with the DRC Partner about forming a joint venture between Och-Ziff and the DRC Partner, through the DRC Partner’s companies, for purposes of acquiring and consolidated mining assets in the DRC into one large publicly traded mining company. The DOJ claims that as part of the arrangement, the DRC Partner would offer Och-Ziff special access to investment opportunities in the DRC while Och-Ziff would finance the DRC Partner’s operations.

As part of the arrangement, between 2007 and 2011, Och-Ziff allegedly provided funds to the DRC partner in the form of equity investments and loans worth several hundred million dollars. According to the DOJ, throughout this process Och-Ziff was aware of a high-risk that a portion of the funds provided to the DRC Partner would be used as bribes. In fact, at least two employees of Och-Ziff allegedly were aware of and participated in making corrupt payments to DRC officials to secure mining interests using funds provided by Och-Ziff.


Libya

From around 2007 to 2010, Och-Ziff retained a London-based third-party consultant (“Libyan Intermediary”) to aid company in obtaining investments from Libya’s sovereign wealth fund, Libya Investment Authority (“LIA”). Och-Ziff agreed to pay the consultant a $3.75 million “finder’s fee” even though an Och-Ziff employee allegedly knew that all or a portion of the fee would be used to bribe Libyan officials to influence the LIA to invest into Och-Ziff’s funds. According to the DOJ, the corrupt payments secured a $300 million investment into Och-Ziff’s funds and resulted in a $100 million pecuniary gain.

In addition, following a $40 million investment by Och-Ziff into a Libyan real estate development project, Och-Ziff allegedly paid a $400,000 “deal fee” to an entity controlled by the Libyan Intermediary which Och-Ziff allegedly understood was to compensate the Libyan Intermediary for bribes paid to Libyan officials in connection with Och-Ziff’s real estate investment.

Other African Investments

According to the DOJ, Och-Ziff also invested in companies doing business in the mining and mineral sectors in other African countries with a high risk of corruption such as Chad, and Niger. The DOJ claims that these additional investments were facilitated through the use of bribery.

* * *

On September 29, 2016, the DOJ announced that it had entered into a DPA with Och-Ziff for violations of the FCPA’s anti-bribery, books-and-records, and internal controls provisions. According to the DPA, Och-Ziff agreed to pay a total monetary penalty of $213,055,689. The SEC separately resolved charges against Och-Ziff in a parallel enforcement action whereby Och-Ziff was ordered to pay a total sanction of $199,045,167.
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Books and records (Issuer), Conspiracy - Anti-Bribery, Internal controls (Issuer)
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Compliance Monitor, Deferred-prosecution Agreement, Fine
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Och-Ziff agreed to pay a total criminal penalty of $213,055,689.
:
Not stated.
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0
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Domestic Concern, Issuer
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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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Gifts, Travel, Wire/check
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Customs Broker or Agent/Consultant, Joint Venture, Sales Agent/Consultant, Shell entity, 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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Malta, Switzerland