Published On: Sun, Oct 2nd, 2016

Hedge fund firm Och-Ziff to pay $412 million in criminal penalties and damages

SEC Prosecutors claim Och-Ziff in 2008 went into business relasionship with Israeli diamond and oil mining billionaire Dan Gertler (Fleurette Group), despite warnings about his repulsive associates.

Israeli billionaire Dan Gertler

In the first U.S. foreign bribery case against a hedge fund, New York-based Och-Ziff Capital Management Group LLC (Och-Ziff) and its wholly-owned subsidiary, OZ Africa,  has agreed to a $412 million settlement.

Up to $213 million of the settlement will go to criminal penalties imposed in connection with participating in a widespread scheme. The scheme involved the bribery of government officials in Congo and Libya.

“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 $39 billion Och-Ziff fund entered into a deferred prosecution agreement, saying charges related to conduct in Congo, Libya, Chad and Niger would be dropped after three years if it follows the terms of the deal.

SEC Prosecutors claim Och-Ziff in 2008 went into business relasionship with Israeli diamond and oil mining billionaire Dan Gertler (Fleurette Group),  despite warnings about his repulsive associates and the fact Gertler used to use his political connections in Africa to fight againsed his rivals. According to Reuters citing a man close to the matter Gertler paid $100 million in bribes to Congolese officials from 2005 to 2012.

Reuters reports that according to prosecutors at least two employees knew Dan Gertler gained access to mining investment opportunities by bribing officials. Those employees, a person familiar with the matter said, were Michael Cohen, Och-Ziff’s former London-based head of European investing, who was responsible for investments in Libya and other African countries and an analyst, Vanja Baros.

The SEC stated that Och-Ziff’s management ignored red flags and violated the anti-bribery, books and records, and internal controls provisions of the SEC Act of 1934 permitting the unlawful transactions to continue.

According to the SEC, additional bribes were paid to secure mining rights and corruptly influence government officials in Libya, Chad, Niger, Guinea and the DRC. Och termed the development of these events as “deeply disappointing, ” and “inconsistent with core values and not representative of hundreds of employees world-wide.”

“I’d like to emphasize that Och-Ziff has taken substantial remedial efforts to improve its compliance program to ensure something like this can never happen again, ” Mark Schonfeld, a lawyer for the New York-based firm, told a federal judge.

According to jurist.org Many fraud cases continue to be litigated eight years after the 2008 financial crisis:

  • Last month the Consumer Financial Protection Bureau (CFPB) slapped a $100 million fine against banking giant Wells Fargo for widespread illegal sales practices.
  • In March 2015 the DOJ criticized the US Sentencing Commission after a federal panel introduced a proposal which would reduce prison time for white-collar criminals.
  • In July 2014 Citigroup, Inc. agreed to pay USD $7 billion to settle a federal inquiry into mortgage-backed securities sold by the bank prior to the financial crisis.
  • In April 2014 the US Supreme Court granted certiorari  to hear a mortgage lending case in which Countrywide failed to provide required information and the borrowers attempted to rescind the loan.
  • Earlier the same month the CFPB ordered  another banking giant, Bank of America, to pay $727 million for its illegal credit card practices. In February 2014 JPMorgan Chase paid a USD $614 million settlement to the US government for its role in approving unqualified mortgages for government insurance.

 

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