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Hedge fund Och-Ziff reaches USD412m settlement with US DoJ and SEC

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Och-Ziff Capital Management is to pay USD412 million to settle US Department of Justice (DoJ) and Securities Exchange Commission (SEC) charges relating its private investment business in Africa and a 2007 investment by the Libyan Investment Authority.

As part of the settlements, Och-Ziff Capital Management Group has entered into a deferred prosecution agreement with the DoJ.
A subsidiary, OZ Africa Management, has agreed to plead guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA). The firm has also agreed to settle an administrative proceeding with the SEC involving violations of the FCPA and the Investment Advisers Act.
Och-Ziff will pay a penalty of USD213 million to the DoJ and disgorgement of USD199 million to the SEC, totalling USD412 million. The firm has previously reserved for these amounts. This amount will be paid using cash on hand and an investment of up to USD400 million made by certain of the firm’s partners through a perpetual preferred stock offering. The settlement clears the way for Och-Ziff to continue investing on behalf of its clients.
Two former employees knowingly participated in a bribery scheme and other violations of the law. These two former employees deliberately concealed their misconduct from other employees at the firm. Och-Ziff’s internal controls were insufficient to detect and prevent this misconduct.
Chief executive officer Daniel Och and chief financial officer Joel Frank have agreed to SEC orders finding they contributed to Och-Ziff’s violation of the books and records provisions of the FCPA, and, in Frank’s case, the internal controls provision of the FCPA. Both individuals settled these matters without admitting or denying wrongdoing, and the settlements carry no restrictions or limitations on them.
Och-Ziff has significantly strengthened its anti-corruption programme and controls. The firm has made a substantial investment to enhance its compliance personnel and infrastructure. The firm has also bolstered its system of checks and balances by forming a business risk committee. Recently, former US Attorney General William Barr was appointed to the Och-Ziff board of directors and chairs the new committee on corporate responsibility and compliance.
Daniel Och, chairman and chief executive officer of Och-Ziff, says: “This has been a deeply disappointing episode. This conduct is inconsistent with our core values and not representative of our hundreds of employees worldwide, who are dedicated to serving our clients with the utmost integrity. We have learned from this experience and taken significant steps to strengthen Och-Ziff. We are pleased to bring this matter to a conclusion and remain focused on generating returns in our funds.”

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