OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC

INDUSTRY

Financial Services/Private Equity

CORPORATE HEADQUARTERS

New York, New York, United States of America

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Chad, Guinea, Niger

Summary of Allegations:

Samuel Mebiame, son of a former Gabonese prime minister and a prominent figure in South Africa, allegedly bribed government officials in Niger, Guinea and Chad to obtain natural-resources deals on behalf of Och-Ziff.

In 2003, Mebiame allegedly began working for Palladino Holdings Ltd. ("Palladino"), a Turks and Caicos investment firm founded by South African investor Olaf Walter Hennig. Mebiame later allegedly began working for Africa Management Ltd. ("Africa Management"), a joint venture created in 2008 between Och-Ziff and Palladino. Africa Management was created allegedly to act as a vehicle to invest in natural resource markets across Africa.

Mebiame was allegedly paid USD 3.5 million, as well as ownership stake in Africa Management, for providing various services to the joint venture, including alleged bribery of foreign officials in Chad and Niger. For example, Mebiame allegedly provided "nice cars" to a Niger public official, with an influence over another official responsible for assigning uranium mining licenses, along with a USD 100,000 payment to the official's charity. In addition, Palladino allegedly transferred more than USD 1.3 million to a company set up in 2007 by another Niger official involved in the alleged bribery scheme. Mebiame ultimately secured uranium concessions for the Africa Management.

In an alleged 2009 dispute over Mebiame's ownership interest in the joint venture, Mebiame allegedly threatened to expose Africa Management's involvement in the bribery scheme to both the authorities and media. The alleged dispute was ultimately resolved and Mebiame allegedly continued to work for the joint venture.


Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: Dem. Rep. of the Congo

Summary of Allegations:

Beginning in 2008, Och-Ziff allegedly entered into a partnership with Israeli billionaire Dan Gertler's holding company, Fleurette Group. Gertler allegedly had closer personal ties to government officials at the highest level in the Democratic Republic of the Congo, including Joseph Kabila, president of the DRC. Although Och-Ziff and Fleurette Group/Gertler did not enter into a written agreement, both parties allegedly was aware of the true nature and purpose of the partnership, allegedly for Och-Ziff to fund the Gertler's mining-related interests in the DRC in exchange for obtaining assets and navigating the DRC business environment in Och-Ziff's benefit through use of Gertler's government contacts.

OchZiff and Gertler allegedly worked to acquire and consolidate assets in the DRC into an entity controlled by Gertler that could then be sold to a large publicly-traded mining company for a significant profit. 

In addition, Between 2010 and 2011, Och-Ziff allegedly loaned USD 130 million to an entity controlled by Gertler from Och-Ziff investor funds. Of the total, USD 84.1 million was allegedly provided to Gertler in the DRC with no restrictions or oversight by Och-Ziff.

Och-Ziff was allegedly aware that Gertler would use the funds Och-Ziff provided to him to pay bribes to government officials in order to maintain his corrupt relationships, acquire assets with the help of his government benefactors, acquire assets at a significant discount to the true value of the asset, and gain favor for his mining interests in the DRC.


Approximate Alleged Payments to Foreign Officials: bribes both in cash and in kind, including in the form of luxury products and extravagant private travel

Business Advantage Allegedly Obtained: securing and holding mining rights, government concessions and preferential treatment

Nationality of Foreign Officials: Libya

Summary of Allegations:

In 2007, Libyan Investment Authority, Libyan dictator Moammar Gadhafi government controlled fund, made a USD 300 million investment in Och-Ziff funds. As part of this deal, Och-Ziff allegedly paid London-based businessman, Mohamad Ali Ajami, with alleged ties to Gadhafi, broker's fee for help winning the investment that allegedly was funneled to the officials of Gadhafi's regime. Ajami allegedly has close ties to Gadhafi's spy chief and allegedly passed portion of the broker fee from Och-Ziff to a Tunisian broker who with a relationship to Seif al-Islam, Gadhafi's son. Och-Ziff allegedly paid the fee knowing that Ajami will use it to pay bribes.

The dealings were allegedly overseen by Michael L. Cohen, then Och-Ziff's head of European investing and oversaw investments in Libya and other African countries. Cohen allegedly traveled to Libya at the time.

In Och-Ziff's books and records, the broker's fee was inaccurately noted as "Professional Services - Other."

In separate incident, Och-Ziff allegedly invested USD 40 million into a Libyan property development project in 2007. Through this investment, Och-Ziff allegedly used investor funds to pay a USD 400,000 "deal fee" to Ajami. Och-Ziff allegedly was aware of the high probability that such would be used to fund bribes by Ajami.


Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: Zimbabwe

Summary of Allegations:

In 2008, a USD 100 million payment allegedly was made to the government of President Robert Mugabe by Central African Mining & Exploration Co. (Camec), a company in which Och-Ziff invested.

Och-Ziff's then Africa director, Vanja Baros, allegedly had made a trip to Zimbabwe in March 2008 and met with people allegedly involved in getting the payment to Mugabe's government, including Billy Rautenbach, Zimbabwean businessman with close ties to Mugabe going back to the 1990s. In 1998, Rautenbach was appointed as managing director of a Congolese state-Controlled mining company at Mugabe's request allegedly with no mining experience.

Baros allegedly reported his trip to Michael L. Cohen prior to his departure for Zimbabwe.  Cohen was then Och-Ziff's head of European investing and oversaw investments in Libya and other African countries.

At the time of Baros' Zimbabwe's visit in March 2008, Israeli billionaire Dan Gertler owned 40% of Camec. which allegedly was attempting to raise funds to invest in platinum assets in Zimbabwe.

In April 2008, Och-Ziff invested in Camec and on 11 April 2008, Camec purchased Lefever Finance Ltd. ("Lefever"), a company controlled by Rautenbach, and its stake in Zimbabwe's platinum mining operations for USD 5 million and 215 million Camec shares. As part of the purchase, Camec allegedly gave USD 100 million to Lefever, which then allegedly lent the money to the Mugabe government.

Camec was bought in 2009 by Eurasian Natural Resources Corp., U.K-Kazakhstan miner.

Both Baros and Cohen resigned from Och-Ziff in 2013.


Approximate Alleged Payments to Foreign Officials: USD 100 million

Business Advantage Allegedly Obtained: Unspecified

ENFORCEMENT RESULTS

Agencies: United States: Civil Lawsuit
Results:
Year Resolved: 2018
Compliance Monitor:
Ongoing: No
Details:

In September 2016, New York state judge dismissed a derivative shareholder suit filed claiming Och-Ziff Capital Management Group LLC's directors allowed the hedge fund manager to violate the FCPA and hid misbehavior from investors in contrary to federal investigations. The court ruled that Och-Ziff acted in good faith in investigating the claims.

On 2 October 2018, Och-Ziff Capital Management Group LLC reached a $28.75 million settlement on a class-action with its shareholders who claimed to have been misled by Och-Ziff. The shareholders accused Och-Ziff of boosting the stock price by concealing the DOJ and SEC’s probes into the bribes Och-Ziff offered to public officials in Libya, the Democratic Republic of Congo, Chad, Guinea, and Niger.



Agencies: United States: Civil Lawsuit
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

In April 2018, a group of former investors of Canadian mining company Africo Resources requested a federal court in New York to order restitution from Och-Ziff for allegedly bribing judges in Africa to stem shareholders’ effort to retrieve control of a mine.



Agencies: United States: Department of Justice
Results: Criminal Fine, Deferred Prosecution Agreement
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Och-Ziff and OZ Management

Beginning in 2011, Och-Ziff has received requests for information from the U.S. Department of Justice ("DOJ") in connection to whether the company may have violated the U.S. Foreign Corrupt Practices Act ("FCPA").  The authorities are concerned with an investment by Libya's government-run investment firm, Libyan Investment Authority, in some of the company's funds in 2007 and investments by some of the funds in a number of companies in Africa.

In April 2016, US authorities reportedly have wrapped up their bribery investigation into Och-Ziff and are in discussions with Och-Ziff over a possible criminal guilty plea and amount of potential financial sanctions. Although Och-Ziff reportedly attempted to settle with a deferred prosecution agreement, a guilty plea is reportedly being pushed by the DOJ as well a civil sanction up to USD 400 million reportedly being sought by the SEC.

In its Form 10-Q filed with the SEC on 3 May 2016, Och-Ziff disclosed that the company has recently begun discussion with the SEC and DOJ and it is probable for the authorities to purse civil and criminal sanctions.  In addition, Och-Ziff has disclosed its accrual of USD 200 million in connection with the matter and probability that amount of loss will be in excess of USD 200 million. 

In its Form 10-Q filed with the SEC on 2 August 2016, Och-Ziff disclosed an additional accrual of USD 214.3 million, totaling USD 414.3 million, in connection with the matter.

On 29 September 2016, the SEC disclosed that Och-Ziff will entered into a deferred prosecution agreement with the DOJ that acknowledges responsibility for criminal conduct relating to SEC's findings in its cease-and-desist order, specifically to violating the FCPA's anti-bribery, books and records and internal controls provisions. As part of the settlement, Och-Ziff agreed to pay a criminal penalty of USD 213,055,689 to the DOJ.

In addition, the SEC disclosed that OZ Africa Management, subsidiary of Och-Ziff, will also entered into a plea agreement with the DOJ related to the SEC's findings in its cease-and-desist order, specifically to violating the anti-bribery provisions of the FCPA.



Agencies: United States: Department of Justice
Results: Prosecution of Individuals
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

Dan Gertler

According to media reports, the DOJ is investigating Dan Gertler's activities in the Democratic Republic of Congo. Gertler allegedly paid more than USD 100 million in bribes to Congolese officials in exchange for access to mineral assets.

Samuel Mebiame

As part of Och-Ziff's cooperation with the US authorities's FCPA investigation of the company, Och-Ziff provided information regarding Mebiame’s involvement and activities. 

On 16 August 2016, federal prosecutors arrested Samuel Mebiame on foreign bribery charges. Although Mebiame appeared in Brooklyn federal court on the same day, he did not enter a plea. Mebiame remains in custody.

On 9 December 2016, Mebiame pleaded guilty in federal court to conspiring to make corrupt payments to government officials in Africa in FCPA violations. He was sentenced to two years in prison on 31 May 2017.



Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Disgorgement
Year Resolved: 2016
Compliance Monitor: thirty-six months
Ongoing: No
Details:

Och-Ziff and OZ Management

Beginning in 2011, Och-Ziff has received subpoenas from the U.S. Securities and Exchange Commission ("SEC") in connection to whether the company may have violated the U.S. Foreign Corrupt Practices Act ("FCPA").  The authorities are concerned with an investment by Libya's government-run investment firm, Libyan Investment Authority, in some of the company's funds in 2007 and investments by some of the funds in a number of companies in Africa.

In April 2016, US authorities reportedly have wrapped up their bribery investigation into Och-Ziff and are in discussions with Och-Ziff over a possible criminal guilty plea and amount of potential financial sanctions. Although Och-Ziff reportedly attempted to settle with a deferred prosecution agreement, a guilty plea is reportedly being pushed by the DOJ as well a civil sanction up to USD 400 million reportedly being sought by the SEC.

In its Form 10-Q filed with the SEC on 3 May 2016, Och-Ziff disclosed that the company has recently begun discussion with the SEC and DOJ and it is probable for the authorities to purse civil and criminal sanctions.  In addition, Och-Ziff has disclosed its accrual of USD 200 million in connection with the matter and probability that amount of loss will be in excess of USD 200 million. 

In its Form 10-Q filed with the SEC on 2 August 2016, Och-Ziff disclosed an additional accrual of USD 214.3 million, totaling USD 414.3 million, in connection with the matter.

On 29 September 2016, Och-Ziff and OZ Management entered into cease-and-desist order to settle the charges that Och-Ziff violated the anti-bribery, books and records and internal controls provisions of the FCPA. As part of the settlement, Och-Ziff and OZ Management agreed to pay, jointly and severally, disgorgement of USD 173,186,178, and prejudgment interest of USD 25,858,989 to the SEC. The SEC noted that the SEC is foregoing a one-time civil penalty of USD 173,186,178 against Och-Ziff based upon the imposition of criminal penalty by the DOJ in the amount of USD 213,055,689.

Furthermore, Och-Ziff agreed to engage and provide full cooperation to an independent monitor for a period of not less than thirty-six months.

16 July 2018, a federal judge in Brooklyn held that the SEC’s claim against Michael L. Cohen and Vanja Baros over the FCPA violation in Africa was barred by the FCPA’s five-year statute of limitations and dismissed the suit.



Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Disgorgement, Prosecution of Individuals
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Daniel Och

On 29 September 2016, Daniel Och, without admitting or denying the SEC's findings, entered into cease-and-desist order to settle the charges that as Och-Ziff’s Chief Executive Officer, Och had final decision-making authority on all private investments by Och-Ziff, including the alleged improper transactions. Och personally approved the expenditure of funds in two transactions with Dan Gertler in the DRC in which bribes were paid. Those bribes were then inaccurately recorded as investments or loans on Och-Ziff’s books and records rather than bribe payments. Despite being aware of the high risk of corruption in transactions with Dan Gertler in the DRC in light of Gertler's reputation and connections to high level government officials, Och approved Och-Ziff to enter into each of these transactions. As a result, although Och did not knew that bribes would be paid, Och caused Och-Ziff’s books and records violations.

As part of the settlement, Och agreed to pay disgorgement of USD 1,900,000 and prejudgment interest of USD 273,718. The SEC noted that the amount of disgorgement reflected his estimated share of gain to Och-Ziff resulting from the DRC Partner transactions.



Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Prosecution of Individuals
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Joel M. Frank

On 29 September 2016, Joel M. Frank, without admitting or denying the SEC's findings, entered into cease-and-desist order with the SEC to settle the charges that as Och-Ziff’s Chief Financial Officer, Frank was responsible for maintaining the accuracy of Och-Ziff’s books and records and for devising and maintaining Och-Ziff’s system of internal accounting controls. Frank approved the expenditure of Och-Ziff funds in transactions in which bribes or improper payments were made. Despite being aware of the high risk of corruption in transactions with Dan Gertler in the DRC in light of Gertler's reputation and connections to high level government officials, Frank authorized Och-Ziff to enter into each of these transactions. As a result, although Frank did not know that bribes would be paid, Frank caused the company’s books and records and internal controls violations.

As part of the settlement, Frank agreed to additional proceedings to determine whether civil penalties against Frank are in public interest. Furthermore, the SEC noted that Frank agreed that: he will be precluded from arguing that he did not violate the federal securities laws as described in the order; he may not challenge the validity of the order; hearing officer will accept the SEC's findings as true and valid; and hearing officer may determine the issues raised in the additional proceedings on the basis of affidavits, declarations, excerpts of sworn deposition or investigative testimony, and documentary evidence.



Agencies: United States: Securities and Exchange Commission
Results: Prosecution of Individuals
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

Michael Cohen & Vanja Baros

On 26 January 2017, the SEC charged Michael L. Cohen, who headed Och-Ziff’s European office, and Vanja Baros, an investment executive on Africa-related deals, with violating the FCPA and Section 30A of the Securities Exchange Act, and aiding and abetting Och-Ziff’s violations. Cohen also is charged with violating Sections 206(1) and 206(2) of the Investment Advisers Act.  The SEC is seeking monetary penalties against Cohen and Baros among other remedies. The SEC's complaint alleges that the two individuals were the masterminds behind Och-Ziff's bribery scheme that improperly used investor funds to pay bribes through agents and partners to high-level government officials in Africa, including Chad, Niger, Guinea, and the Democratic Republic of the Congo.



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