A major play for African assets led by a company of hedge fund speculators in the U.S. has been smashed with a penalty settlement of $412 million, ending a multiyear investigation.
The settlement with the U.S. Department of Justice and other agencies ends the freewheeling efforts of the Och-Ziff Capital Management Fund to pick up diamond and platinum mines across Africa with secret bribes to officials in Libya, the Democratic Republic of Congo, Chad, Zimbabwe and Guinea that totaled millions of dollars.
The suit, U.S. v. Och-Ziff Capital Management Group, was filed in U.S. District Court, Eastern District of New York.
Prosecutors alleged that Och-Ziff bribed politicians, officials and judges to obtain lucrative mining rights across Africa. The Securities and Exchange Commission detailed close to $200 million in bribes over the course of several years between 2007 and 2011—one of the greatest sums in the history of the Foreign Corrupt Practice Act.
Bribery laws make it a crime for U.S. companies to give “anything of value” to foreign officials to obtain “an improper advantage” in winning business.
“In its pursuit of profits,” said David Bitkower of the Justice Department’s Criminal Division, “Och-Ziff and its agents paid millions in bribes to high-level officials across Africa.”
In the apparent belief that their operation would never be discovered, Och-Ziff employees ran rampant, handing out duffel bags stuffed with cash, sending texts boasting about bribes to judges and attempting to hire a fixer described by an Och-Ziff employee as the impetus behind the movie “Blood Diamonds,” according to published reports. One Guinean official received a ride in a private Airbus and two officials from Niger received an S-Class Mercedes sedan each, according to Quartz news media in a report by investigative reporter Lily Kuo.
“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.
Corrupt practices listed in U.S. v. Och-Ziff included the “DRC Bribery Scheme,” in which Och-Ziff company men lined up a partnership with a businessman known to have close ties to the government. Tens of millions of dollars in bribes were funneled through the unnamed businessman to DRC officials in exchange for investment opportunities leading to $90 million in profits for Och-Ziff. Daniel Och, the company CEO, had final authority to approve all private investments, heard the allegations and accusations against the DRC partner and was advised against doing business with the partner, the SEC said. But, the SEC alleged, he approved the deals despite knowing the risks involved.
In Libya, Och-Ziff won a $300 million investment from the Libyan Investment Authority with help from a corrupt agent who received a “finder’s fee,” some of which, it was known, would pay off local officials, including a son of Libya’s fallen Muammar Gadaffi.
In Guinea, an Och-Ziff operative helped re-write the country’s mining code, and a related investment of $25 million to finance the country’s state mining company has reportedly disappeared.
Part of a $150 million Och-Ziff investment in a small Zimbabwean mining company is said to have been funneled to the government through a local company there.
In August, FBI agents arrested a Gabonese national in Brooklyn who, while working for a joint venture with Och-Ziff, paid bribes to foreign officials to secure mineral concessions in at least three African countries. Samuel Mebiame, the son of a former prime minister of Gabon, “routinely paid bribes to officials in Niger, Guinea and Chad,” according to a criminal complaint filed in U.S. District Court in Brooklyn.
“This has been a deeply disappointing episode,” said Och in a statement.
The penalty agreement was signed by David M. Becker, Och-Ziff’s chief legal officer. Och will pay $2.2 million to settle a record-keeping violation with the SEC. CFO Joel Frank has agreed to cooperate in the continuing investigation and any penalties against him will be assessed later, according to the SEC.