Och-Ziff Capital Management Group resolved one of the biggest FCPA enforcement actions ever Thursday, agreeing to pay the DOJ and SEC $412 million for criminal and civil violations.
Och-Ziff CEO Daniel Och agreed to pay nearly $2.2 million to settle SEC charges that he caused FCPA violations.
Och-Ziff will pay $199 million to the SEC to settle civil charges of violating the Foreign Corrupt Practices Act.
The hedge fund giant also entered into a three-year deferred prosecution agreement with the Justice Department in a parallel criminal proceeding, with a criminal penalty of $213 million.
The DPA charged Och-Ziff with two counts of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, one count of falsifying its books and records, and one count of failing to implement adequate internal controls.
Och-Ziff subsidiary OZ Africa Management GP LLC pleaded guilty to a one-count criminal information filed in federal court in New York City.
OZ Africa was charged with a conspiracy to violate the anti-bribery provisions of the FCPA. Formal sentencing was set for March 29, 2017.
At $412 million, Och-Ziff’s settlement with the DOJ and SEC is the fourth biggest FCPA enforcement action ever.
“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” the DOJ’s David Bitkower said.
The SEC charged Och-Ziff with violating the anti-bribery, books and records, and internal controls provisions of the FCPA.
The settlement requires Och-Ziff to retain a compliance monitor for three years.
The SEC settled the enforcement action with an internal administrative order and didn’t go to court.
Och-Ziff CFO Joel Frank also agreed to settle SEC charges. A “penalty will be assessed against him at a future date,” the SEC said. He caused violations in Och-Ziff transactions in Libya and the Democratic Republic of the Congo, the agency said.
Frank and Daniel Och consented to the SEC’s order without admitting or denying the findings.
The SEC ordered Och to pay $1.9 million in disgorgement and nearly $274,000 in interest to settle charges he caused violations in two Och-Ziff transactions in the Democratic Republic of the Congo.
Och-Ziff’s affiliated investment adviser OZ Management violated the anti-fraud provisions of the Investment Advisers Act of 1940, the SEC said.
Och-Ziff and OZ Management agreed to pay the SEC about $173 million in disgorgement and $25.8 million in interest, for a total of $199 million.
In August, U.S. authorities arrested a Gabon national and charged him with conspiracy to bribe officials in at least three African countries to help win mining rights for a joint venture involving Och-Ziff.
The DOJ said Samuel Mebiame, 43, the son of Gabon’s former prime minister, acted as a “fixer” for the joint venture.
He was arrested in Brooklyn.
Mebiame’s father, Leon Mebiame, was prime minister of Gabon from 1975 to 1990. He died in December 2015.
Och-Ziff said last month it doubled its reserve for an FCPA settlement with the DOJ and SEC to about $414 million.
New York-based Och-Ziff was founded in 1994 by Daniel Och. It’s one of the biggest institutional alternative asset managers in the world, with about $39 billion under management.
Och-Ziff received subpoenas from the DOJ and SEC beginning in 2011 requesting information about investments its funds made in Africa, among other things.
The SEC said Thursday it detected the FCPA violations while examining the way Och-Ziff was obtaining investments from sovereign wealth funds overseas.
The SEC’s investigation found that the hedge fund used intermediaries, agents, and business partners to pay bribes to high-level government officials in Africa.
According to the SEC’s order, bribes induced the Libyan Investment Authority’s sovereign wealth fund to invest at least $300 million in Och-Ziff managed funds.
In January and October 2008, Och-Ziff transferred a total of $3.75 million to Libyan Agent’s shell company. Libyan Agent then directed the transfer of approximately $2.5 million from those funds to an account held by Tunisian Agent for the benefit of the two senior [Libya Investment Authority] officials, including the son of Colonel Gaddafi. During this period, Libyan Agent also directed payments of more than $1 million through his network of offshore companies to benefit his longstanding patron in Libya’s state security services.
Och-Ziff recorded the money paid to the Libyan Agent as “Professional Services – Other.”
“This designation was inaccurate; the payment was for an introduction and to pay bribes, and not for professional services,” the SEC said.
Other bribes were paid to secure mining rights and influence government officials in Chad, Niger, Guinea, and the Democratic Republic of the Congo.
“Och-Ziff engaged in complicated, far-reaching schemes to get special access and secure significant deals and profits through corruption,” the SEC’s Andrew Ceresney said.
The SEC said Och-Ziff executives ignored red flags and corruption risks and permitted illegal transactions to proceed.
Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, said: “Firms will be held accountable for their misconduct no matter how they might structure complex transactions or attempt to insulate themselves from the conduct of their employees or agents.”
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The SEC’s September 29, 2016 order In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.