In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank (2016)
Case Details
- Case Name
- In the Matter of Och-Ziff Capital Management Group LLC, OZ Management LP, Daniel S. Och, and Joel M. Frank (2016)
- Countries
- Chad, Libya, Niger, Guinea, Congo, Dem. Rep.
- Foreign Official
- Unnamed government officials from Chad, the Democratic Republic of the Congo, Guinea, Libya, and Niger.
- Date of Conduct
-
2007 to 2011
- Nature of Business
- Och-Ziff Capital Management Group LLC is a New York-based hedge fund incorporated in Delaware, which maintains a class of common stock that is registered with the SEC and trades on the New York Stock Exchange. Och-Ziff controls numerous consolidated subsidiaries and affiliates through which it provides investment advisory and management services to Och-Ziff investor funds in return for management fees and incentive income. OZ Management Group LLC is a registered investment adviser incorporated in Delaware, which managed some of Och-Ziff’s investment funds. Daniel S. Och, an American citizen, is the Chief Executive Officer and Chairman of Och-Ziff’s Board of Directors, and he also is an officer and partner at OZ Management. Joel M. Frank is the Chief Financial Officer of Och-Ziff and is a U.S. citizen.
- Influence to be Obtained
- According to the SEC, from about 2007 to 2011, Och-Ziff entered into a series of transactions in which it paid bribes through intermediaries, agents, and business partners to high ranking government officials in multiple African countries, including Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo (“DRC”). The SEC claims that the bribes were allegedly paid with the specific knowledge of a senior Och-Ziff employee and that other Och-Ziff executives ignored red-flags to permit the transactions to proceed. The specific transactions are described below.
· In 2007, Och-Ziff secured a $300 million investment from the Libyan Investment Authority after allegedly paying bribes worth more than $3 million to Libyan government officials through a local agent.
· In 2007, Och-Ziff allegedly used $400,000 to pay a “deal fee” to a local Libyan agent, despite being aware of the high probability that some of those funds would be used as bribes to benefit a Libyan property development project into which Och-Ziff had invested $40 million.
· In 2007 and 2008, Och-Ziff allegedly loaned more than $86 million to a South African partner even though it was aware of the high probability that at least a portion of those funds would be used to bribe foreign officials in Chad and Niger in exchange for mining rights in those countries.
· In 2008, Och-Ziff allegedly provided a $124 million loan to an entity affiliated with an Israeli businessman to purchase mining assets in the DRC through bribing highly ranked officials. According to the SEC, certain Och-Ziff employees had knowledge of this transaction.
· In 2010 and 2011, Och-Ziff loaned the same Israeli businessman $130 million, of which $84.1 million was allegedly provided without any restrictions or oversight by Och-Ziff. The SEC claims that Och-Ziff employees knew that the Israeli businessman would use a portion of the funds to pay bribes to high ranking DRC government officials.
· In 2011, Och-Ziff allegedly purchased shares in a London-based oil exploration company from a South African partner, intending to provide him with capital to use elsewhere. The SEC claims that the South African partner paid more than $1 million of those funds to a local consultant who then used them to bribe government officials in Guinea. According to the SEC, Och-Ziff failed to conduct sufficient due diligence on the use of those funds to prevent the payment of bribes.
According to the SEC, Och and Frank personally approved several of the transactions in which bribes or improper payments were made, although they were not aware that bribes would be paid as a result. However, the SEC argued that they were aware of the high risk of corruption involved in the transactions, and thus they were found to have caused Och-Ziff’s violations of the FCPA.
- Enforcement
- On September 29, 2016, the SEC announced that it had resolved its enforcement action against Och-Ziff for violations of the FCPA’s anti-bribery, books-and-records, and internal controls provisions. Och-Ziff was also charged with multiple violations of the Investment Advisors Act for allegedly defrauding clients and prospective clients. Och-Ziff’s subsidiary, OZ Management LP; Och-Ziff’s founder, CEO, and Chairman of the Board, Daniel S. Och; and Och-Ziff’s CFO, Joel M. Frank, were also named in the SEC’s action. According to the SEC’s order, Och-Ziff would be required to pay a total penalty of $199,045,167. In addition, Daniel S. Och required to pay total sanction of $2,173,718 for his involvement and oversight of the transactions in the DRC. The Commission’s order also stated that a penalty would be assessed against Joel Frank at a later date.
The DOJ separately entered into an agreement with Och-Ziff that required the hedge-fund to pay an additional criminal penalty of $213,055,689.
- Amount of the Value
- Not Stated
- Amount of Business Related to Payment
- Not Stated
- Intermediary
- Customs Broker or Agent/Consultant, Joint Venture; Sales Agent/Consultant; Subsidiary Company; Third-Party Distributors
- Citizenship of Parent Entity
- United States
- Total Sanction
- $ 201,218,885
- Reporting Requirements
- No
- Total Combined Monetary Sanction
- $ 414,309,574
Defendants
Och-Ziff Capital Management Group LLC
- Citation
- In the Matter of Och-Ziff Capital Management Group, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (Sept. 29, 2016).
- Other Statutory Provision
- Advisers Act §§ 206(1), 206(2), 206(4), and Rule 206(4)-8 (OZ Management).
- Disposition
- Cease-and-Desist Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
- Individual Sanction
- $199,045,167
OZ Management LP
- Citation
- In the Matter of Och-Ziff Capital Management Group, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (Sept. 29, 2016).
- Other Statutory Provision
- Advisers Act §§ 206(1), 206(2), 206(4), and Rule 206(4)-8 (OZ Management).
- Disposition
- Cease-and-Desist Order
- Defendant Jurisdictional Basis
- Agent of Issuer
- Defendant's Citizenship
- United States
- Individual Sanction
- $199,045
Daniel S. Och
- Citation
- In the Matter of Och-Ziff Capital Management Group, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (Sept. 29, 2016).
- Other Statutory Provision
- Advisers Act §§ 206(1), 206(2), 206(4), and Rule 206(4)-8 (OZ Management).
- Disposition
- Cease-and-Desist Order
- Defendant Jurisdictional Basis
- Agent of Issuer
- Defendant's Citizenship
- United States
- Individual Sanction
- $2,173,718
Joel M. Frank
- Citation
- In the Matter of Och-Ziff Capital Management Group, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (Sept. 29, 2016).
- Other Statutory Provision
- In the Matter of Och-Ziff Capital Management Group, OZ Management LP, Daniel S. Och, and Joel M. Frank, Admin. Proc. File No. 3-17595 (Sept. 29, 2016).
- Disposition
- Cease-and-Desist Order
- Defendant Jurisdictional Basis
- Agent of Issuer
- Defendant's Citizenship
- United States
- Individual Sanction
- $35,000.
