Washington D.C. October 9, 2016. Och-Ziff Capital Management Group (Och-Ziff), A New York-based alternative investment and hedge fund manager, agreed to pay a combined total amount of U.S. criminal and regulatory penalties of approximately $412 million to settle charges it violated the Foreign Corrupt Practices Act. In separate announcements yesterday the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) each described the actions of Och-Ziff which led to the charges the company violated the FCPA.
“Och-Ziff falsely recorded the bribe payments and failed to devise and maintain proper internal controls,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. “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.”
According to the SEC Och-Ziff executives ignored red flags and corruption risks and permitted illicit transactions to proceed. Och-Ziff CEO Daniel S. Och agreed to pay nearly $2.2 million to settle SEC charges that he caused certain violations along with CFO Joel M. Frank, who also agreed to settle the charges.
The SEC found Och-Ziff violated the anti-bribery, books and records, and internal controls provisions of the Securities Exchange Act of 1934, and affiliated investment adviser OZ Management violated the anti-fraud provisions of the Investment Advisers Act of 1940. Och-Ziff and OZ Management agreed to pay $173,186,178 in disgorgement plus $25,858,989 in interest for a total of $199,045,167. The SEC also found that Och caused violations in two Och-Ziff transactions in the Democratic Republic of the Congo, and he agreed to pay $1.9 million in disgorgement and $273,718 in interest to settle the charges. Frank was found to have caused violations in Och-Ziff transactions in Libya and the Democratic Republic of the Congo, and a penalty will be assessed against him at a future date. Och and Frank consented to the SEC’s order without admitting or denying the findings.
As part of its settlement agreement with the SEC, Och-Ziff acknowledged that would enter into a deferred prosecution agreement with the DOJ in a parallel criminal proceeding, and its subsidiary OZ Africa Management GP LLC agreed to enter into a plea agreement.
“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower. “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa. By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”
The deferred prosecution agreement Och-Ziff entered contains criminal information charging the company with two counts of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), one count of falsifying its books and records and one count of failing to implement adequate internal controls. Pursuant to its agreement with the DOJ, Och-Ziff agreed to pay a total criminal penalty of $213,055,689. Och-Ziff also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.