Och-Ziff Capital Management Group LLC will pay $412 million and CEO Daniel Och will pay $2.17 million to resolve U.S. probes into the hedge fund’s role in bribing officials in several African countries, U.S. authorities said on Thursday.
In the first U.S. foreign bribery case against a hedge fund, Och-Ziff subsidiary OZ Africa Management GP LLC pleaded guilty in federal court in Brooklyn to participating in a scheme to bribe officials in the Democratic Republic of Congo.
Och-Ziff meanwhile entered into a deferred prosecution agreement, in which charges related to conduct in Congo, Libya, Chad and Niger would be dropped after three years if it follows the terms of the deal.
“I’d like to emphasize that Och-Ziff has taken substantial remedial efforts to improve its compliance program to ensure something like this can never happen again,” Mark Schonfeld, a lawyer for the New York-based firm, told a federal judge.
In total, Och-Ziff will pay $412 million to resolve the U.S. Justice Department and U.S. Securities and Exchange Commission cases, $213 million of which constituted a criminal penalty. It also agreed to the appointment of an independent monitor.
Och agreed to pay $2.17 million to settle SEC charges that caused certain violations along with CFO Joel Frank, who also reached a settlement, the regulator said.
BRIBES TIED TO MINING, SOVEREIGN WEALTH FUND
The deals capped U.S. probes into the $39 billion hedge fund firm that centered in part on Michael Cohen, Och-Ziff’s former London-based head of European investing, who was responsible for investments in Libya and other African countries.
According to authorities, in 2008, Och-Ziff entered into a partnership with an Israeli businessman with close ties to high-level Congonese officials in order to fund his mining-related interests.
At least two employees, though, knew the businessman gained access to these investment opportunities by bribing officials, prosecutors said. Those employees, a person familiar with the matter said, were Cohen and an analyst, Vanja Baros.
Authorities did not name the businessman, whom they said had paid over $100 million in bribes to Congolese officials from 2005 to 2012. But the source said it was Israeli billionaire Dan Gertler.
Gertler’s Fleurette Group declined comment. Lawyers for Cohen and Baros did not respond to requests for comment.
Separately, beginning in 2007, an employee, who the source said was Cohen, engaged a London-based middleman to help it secure an investment from the Libyan sovereign wealth fund, the Libyan Investment Authority, prosecutors said.
Prosecutors said Och-Ziff received a $300 million investment into its hedge funds, and soon after entered into an agreement to pay a sham $3.75 million “finder’s fee,” which it knew would be used to pay Libyan officials in exchange.
The Justice Department said its investigation remains ongoing. The probe has resulted in one individual being criminally charged.
In August, Samuel Mebiame, a Gabonese man who U.S. authorities said acted as a “fixer” for a joint-venture involving Och-Ziff, was arrested and accused of engaging in a scheme to bribe officials in Africa to obtain mining rights.
A criminal complaint said Mebiame supplied cash and cars to two Niger officials; an S-class Mercedes Benz sedan and rented private Airbus jet to a Guinean official; and travel and shopping expenses for an adviser to Chad’s president.
A lawyer for Mebiame declined comment.
Och-Ziff shares closed up 5.65 percent at $4.49.
The cases in the U.S. District Court, Eastern District of New York, are U.S. v. OZ Africa Management GP LLC, No. 16-cr-00515, and U.S. v. Och-Ziff Capital Management Group LLC, No. 16-cr-00516.
Hedge fund Och-Ziff has to be cough up $412 million after the US Department of Justice and the Securities and Exchange Commission found the New York-based firm violated the Foreign Corrupt Practices Act.
Two executives, Daniel Och and CFO Joel Frank, also agreed to a financial settlement with founder Och ordered to pay a fine of nearly $2.2 million to settle SEC case.
According to Global Witness, a human rights organization, some of the key violations in the Och-Ziff case came in mining and oil and gas deals in Democratic Republic of Congo:
“In the course of its Congo deals Och-Ziff financed the Israeli billionaire mining and oil magnate Dan Gertler in his acquisition of companies and mining and oil assets. A “significant portion” of the loans paid to Och-Ziff’s “Israeli businessman…partner in DRC” were used “to pay bribes to high-ranking DRC officials to secure mining assets for Och-Ziff and its partner”, according to a document published by the SEC.
Gertler disputes any wrongdoing in his business dealings in Congo. His spokesperson has said prior to the release of the SEC document that the Och-Ziff case has “nothing to do with [Gertler’s] Fleurette”.
Gertler is the grandson of Moshe Schnitzer, Israeli diamond exchange founder, and arrived in the Congo in 1997 shortly after the military coup that put current president Joseph Kabila’s father in charge of the resource rich country which is almost the size of Western Europe.
Gertler is alleged to have used his relationship with the younger Kabila and his now late adviser Augustin Katumba Mwanke to bag mining projects “by stripping from others if necessary, only to sell them on at great profit.”
Now delisted Kazakh mining group ENRC, was forced to pay out $1.25 billion to Canadian mining firm First Quantum in 2012 after the DRC government expropriated First Quantum’s Kolwezi copper projects in the country only to sell them onto ENRC via Gertler.
ENRC acquired a 50.5% stake in Camrose, a company controlled by the Gertler family trust, for $550 million last year. Camrose owns Africo Resources, previously listed in Toronto, which partners with DRC’s state-owned Gecamines in various copper-cobalt, gold and iron projects and dominates the DRC diamond trade.
ENRC has been under investigation by the UK’s Serious Fraud Office since 2013.
Kabila has on occasion dispatched Gertler as special peace envoy for the DRC and Gertler answers his critics by saying he’s attracted $7 billion worth of much-needed investment to the war-torn country.