Chidem Kurdas
Sounds like NYSE-listed hedge fund company Och-Ziff Capital Management Group will not escape the Department of Justice investigation into violations of the Foreign Corrupt Practices Act without paying some penalty.
In question are investments made by Libya’s sovereign wealth fund in African companies, specifically mining and oil businesses in Congo, via Och-Ziff vehicles in 2007.
Och-Ziff provided loans of $234 million to facilitate an investment, money that is suspected of involving a bribe. At the time Libya and its sovereign wealth fund were under the control of the Gaddafi family.
Observers expect a deal involving a fine with the Department of Justice and the U.S. Securities and Exchange Commission. The firm has said that it can’t “predict the full scope, duration or outcome of the SEC and DoJ investigation,” but “believes that it is reasonably likely that the outcome would include the government pursuing remedies” and expects to enter discussions.
Recently the Department of Justice announced that it will hire a compliance counsel to determine whether a company facing corruption allegations is the victim of a rogue employee or has a culture encouraging an action like bribery. A firm that has a strong compliance system in place may be treated with less severity.
Last year Och-Ziff instituted a legal and regulatory compliance program to train employees. The program includes training “specifically targeted at ensuring the understanding of and compliance with the Foreign Corrupt Practices Act and, as applicable, other foreign anti-corruption laws and regulations.” Presumably this will help in reaching an agreement with the DoJ.
While the government continues probing the matter, groups of Och-Ziff public shareholders have sued the company. The lawsuits basically claim that Och-Ziff kept its share price artificially high by delaying the disclosure of the investigation.
This July lawyers for Och-Ziff asked that a class action suit be dismissed because it does not provide specific evidence that there was bribery. Given all the turmoil in Libya in recent years, proving bribery may be difficult.
HedgeFundSmarts 
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