Hedge fund Och-Ziff Capital Management Group has agreed to pay a criminal penalty of more than $213 million to the United States Dept of Justce, in connection with a widespread scheme involving the bribery of officials in the Democratic Republic of Congo (DRC) and Libya.
It will pay an additional $199 million to the Securities and Exchange Commission (SEC), bringing the total penalty to $412 million.
Och-Ziff admitted that, beginning in 2007, it engaged a third-party agent to assist the company in securing an investment from the Libyan Investment Authority (LIA), that country’s sovereign wealth fund, knowing the agent would need to pay bribes to Libyan officials.
The agent was engaged without formal approval or any due diligence, according to court documents. The company admitted that, beginning in February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between a senior Och-Ziff employee and the Libyan official empowered to make investment decisions for the LIA.
In late November 2007, Och-Ziff received a $300 million investment from the LIA into the company’s hedge funds. Och-Ziff admitted that it subsequently entered into an agreement to pay the agent a “finder’s fee” of $3.75 million, knowing that all or a portion of the fees would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment.
In addition, Och-Ziff admitted that it falsified its books and records and attempted to conceal and disguise the bribes paid through the agent by paying the “finder’s fee” through a sham consulting 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.”
“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad and Niger,” said U.S. Attorney Capers.
(Sources: US Dept of Justice, Och-Ziff)