On September 29, Och-Ziff Capital Management (Och-Ziff) agreed to pay approximately $412 million to the DOJ and SEC to resolve related criminal and civil charges of violating the FCPA in connection with the bribery of high-level government officials across Africa. This is the fourth-largest FCPA enforcement settlement of all time, and the first time a hedge fund has been held accountable for violating the FCPA. In addition, both the SEC and DOJ made clear that their investigations, including of those of individuals, are ongoing, making it possible that the government is not finished collecting FCPA fines from related parties and individuals.
In the criminal case, Och-Ziff, a New York-based publicly-traded hedge fund, entered into a three-year deferred prosecution agreement (DPA) to resolve charges of conspiracy to violate the FCPA, falsification of books and records, and failure to implement adequate internal controls. Och-Ziff agreed to pay a criminal penalty of approximately $213 million, and to retain a compliance monitor for three years. OZ Africa Management (OZ Africa), a wholly-owned subsidiary of Och-Ziff, pleaded guilty to a one-count criminal information charging it with conspiracy to violate the FCPA. Sentencing is set for March 29, 2017.
The DPA’s Statement of Facts describes bribes paid to government officials in the Democratic Republic of Congo (Congo) and Libya to help Och-Ziff (i) obtain special access and preferential prices for investment opportunities in government controlled-mining sectors in Congo, and (ii) secure an investment from the Libyan Investment Authority, Libya’s sovereign wealth fund.
In parallel proceedings, Och-Ziff agreed to pay $199 million to the SEC and entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle the FCPA civil charges. The SEC’s allegations covered Libya, Chad, Niger, and the Congo, and alleged that Och-Ziff used intermediaries, agents, and business partners to corruptly influence foreign officials. The Order found that Och-Ziff executives ignored red flags and corruption risks and permitted the corrupt transactions to proceed.. Both Och-Ziff CEO Daniel S. Och and CFO Joel M. Frank agreed to settle related allegations, without admitting or denying the findings. Och agreed to pay nearly $2.2 million to the SEC in the settlement, and a penalty will be assessed against Frank at a future date. In addition, Oz Management, an affiliated investment adviser of Och-Ziff, settled charges that it violated the anti-fraud provisions of the Investment Advisers Act of 1940.
The FCPA Scorecard previously covered Och-Ziff’s August 2016 10-Q filing, which disclosed substantial financial reserves set aside for alleged FCPA violations for over half a decade.