Och-Ziff to Pay $400M to Settle Bribery Charges

The hedge fund group made “illicit payments” to African officials for access to mining assets and to encourage investment in Och-Ziff funds, the SEC alleged.

Hedge fund giant Och-Ziff will pay more than $400 million to settle charges that it used intermediaries and business partners to bribe African government officials.

The firm agreed to pay nearly $200 million to the US Securities and Exchange Commission (SEC) as part of the settlement, the regulator said in a statement released Thursday.

“Senior executives cannot turn a blind eye to the acts of their employees or agents.”Och-Ziff CEO Daniel Och agreed to pay $2.2 million to settle charges that he “caused certain violations” of the Foreign Corrupt Practices Act (FCPA). Chief Financial Officer Joel Frank also settled SEC charges, but his penalty is yet to be decided.

In addition, the firm has agreed to pay $213 million to settle related charges from the Department of Justice.

The SEC alleged that Och-Ziff used “intermediaries, agents, and business partners” to pay bribes to officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo.

In Libya, illicit payments connected to Och-Ziff induced the Libyan Investment Authority, the country’s $67 billion sovereign wealth fund, to invest in the company’s products. Other bribes were used to secure mining rights for Och-Ziff funds and to influence government officials, the SEC said.

“Och-Ziff engaged in complicated, far-reaching schemes to get special access and secure significant deals and profits through corruption,” said Andrew Ceresney, director of the SEC’s enforcement division. “Senior executives cannot turn a blind eye to the acts of their employees or agents when they [become] aware of suspicious transactions with high-risk partners in foreign countries.”

Och-Ziff also failed to properly record the use of money and did not have adequate internal checks and controls to prevent the bribes being paid.

“This conduct is inconsistent with our core values and not representative of our hundreds of employees worldwide.”“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,” said Kara Brockmeyer, chief of the enforcement division’s FCPA unit.

“This has been a deeply disappointing episode,” CEO Och said in a statement. “This conduct is inconsistent with our core values and not representative of our hundreds of employees worldwide, who are dedicated to serving our clients with the utmost integrity. We have learned from this experience and taken significant steps to strengthen Och-Ziff. We are pleased to bring this matter to a conclusion and remain focused on generating returns in our funds.”

News of the regulatory action first emerged in 2014, when Och-Ziff revealed in a 10-K filing that the SEC had been issuing subpoenas and the Department of Justice had been requesting information since 2011 relating to the company’s activities in Africa.

The SEC’s investigation is continuing, and has involved the co-operation of regulators in the UK, the Channel Islands, Cyprus, and Gibraltar, as well as Switzerland’s Ministry of Justice.

Related: Market Shrugs Off Och-Ziff Revelation & How Much Does Poor Compliance Cost?

| CIOeditors@strategic-i.com |