NEW YORK CITY: Hedge fund Och-Ziff Capital Management Group will pay $413 million to settle charges it bribed officials in the Democratic Republic of the Congo, Libya and other African countries, officials said on Thursday (Friday in Manila).
Och-Ziff, which has more than $39 billion under management, paid bribes to officials to secure mining rights and to win investment in the company from a Libyan sovereign wealth fund, according to officials from the US Justice Department and Securities and Exchange Commission.
The company passed millions to local officials including a son of Libya’s fallen dictator Moamer Kadhafi, according to the SEC.
The firm will pay $213 million in criminal fines to the Justice Department and a further $200 million in disgorgement of profits and interest to the SEC. Its Africa unit also entered a guilty plea to a single count of conspiracy to commit foreign bribery.
The company will be subject to the oversight of an outside compliance monitor for three years.
“Och-Ziff engaged in complicated, far-reaching schemes to get special access and secure significant deals and profits through corruption,” Andrew Ceresney, the SEC’s head of the enforcement, said in a statement.
According to the Justice Department, the case marked the first time a hedge fund had been held to account under US foreign bribery laws.
Under the 1977 Foreign Corrupt Practices Act, it is illegal for US companies and citizens to pay bribes to foreign officials to win business. Unlike similar laws in other developed countries, the US law is enforced by both criminal authorities and market regulators.
Two executives, the firm’s founder and chief executive officer, Daniel Och, 55, and Chief Financial Officer Joel Frank, 61, also agreed to settle civil charges brought by the SEC, which accused the men of ignoring red flags and permitting illegal transactions to proceed.
Och will pay $2.2 million in the SEC case while Frank has agreed to cooperate in the continuing investigation and any penalties against him will be assessed later, according to the SEC.
In a statement, Och expressed regret.
“This has been a deeply disappointing episode,” he said. “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.”
He added that the company had taken steps to improve its conduct.
Och was personally involved in the bribery, according to the SEC, authorizing two corrupt transactions in the Democratic Republic of the Congo.
The case gained additional notoriety last month when federal agents in Brooklyn detained Samuel Mebiame, a Gabonese consultant to an Och-Ziff joint venture who was arrested on charges of paying bribes to win mineral rights in three African countries.
In addition to bribery in Libya and the Democratic Republic of the Congo, between 2007 and 2011 Och-Ziff also engaged in corruption-tainted transactions in Chad, Niger and Guinea.
In a conference call with reporters, the SEC’s Ceresney said the Och-Ziff matter had arisen from a so-called enforcement “sweep” begun in 2011 of the financial services industry’s dealings with sovereign wealth funds.