Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« U.S. fines disbarred Canada lawyer $280,000 for ‘money pass’ scheme | Main | Donna Boehme: Five signs that Compliance 2.0 is the new normal »
Thursday
Aug042016

Och-Ziff lifts FCPA reserve to more than $400 million

Och-Ziff Capital Management Group LLC said Tuesday it has doubled its reserve for an FCPA settlement to more than $400 million.

The publicly-traded hedge fund in May reserved $200 million to resolve offenses arising from alleged bribes in Libya.

In Tuesday's earnings release, Och-Ziff said it recorded an additional charge of $214.3 million during the quarter for FCPA investigations, bringing the full reserve to $414.3 million.

The firm said "based on discussions with the SEC and DOJ it believes that the government will pursue civil and criminal sanctions."

Och-Ziff said "any resolution could have a material adverse effect" on its business, financial condition, or results of operations.

It reported a quarterly loss of $184.3 million.

In May, Och-Ziff said it received subpoenas from the DOJ and SEC beginning in 2011 requesting information about an investment "by a foreign sovereign wealth fund in some of our funds in 2007 and investments by some of our funds, both directly and indirectly, in a number of companies in Africa."

The sovereign wealth fund referred to in the disclosure was the $65 billion Libyan Investment Authority, based in Tripoli.

On Tuesday, Och-Ziff said in a press release that it appointed William Barr to its eight-member board of directors. Barr served as U.S. attorney general from November 1991 to January 1993 under President George H.W. Bush.

New York-based Och-Ziff was founded in 1994 by Daniel Och. It's one of the biggest institutional alternative asset managers in the world. It has about $39 billion under management.

In 2011, the SEC launched a broad investigation into whether banks, private-equity firms, and other money managers violated the FCPA in their dealings with sovereign wealth funds.

An enforcement action of more than $400 million would rank fourth on the FCPA Blog's top ten list. Currently BAE Systems ranks fourth with a $400 million FCPA resolution in 2010. KBR / Halliburton is third with a $529 million settlement in 2009.

The FCPA investigation is focused on Och-Ziff's former head of European investing, Michael Cohen, the Wall Street Journal said. Cohen, based in London, was responsible for investments in Libya and other African countries. He resigned from Och-Ziff in March 2013 after 15 years.

The firm said Tuesday it may issue new preferred units to raise $500 million to fund the FCPA matter and general business expenses. 

Och-Ziff Capital Management Group LLC trades on the NYSE under the symbol OZM.

*     *     *

Here's the main FCPA disclosure from Och-Ziff's Form 10-Q filed with the SEC on August 2, 2016:

As previously disclosed, since 2011, the Company has been investigated by the U.S. Securities and Exchange Commission (the “SEC”) and the U.S. Department of Justice (the “DOJ”) concerning possible violations of the FCPA and other laws. While the Company is unable to predict the full scope, duration or outcome of the SEC and DOJ investigations, based on discussions with the SEC and DOJ it believes that the government will pursue civil and criminal sanctions. The Company is in discussions with the SEC and DOJ concerning resolution of these matters. The Company accrued $200.0 million in the first quarter of 2016 in connection with the disclosed investigations and recorded an additional charge of $214.3 million in connection with the disclosed investigations for the second quarter of 2016. The probable estimated loss, which totals $414.3 million, may be subject to change based on the terms of any final settlement with the SEC and DOJ relating to those matters. Any resolution could have a material adverse effect on the Company’s business, financial condition or results of operations.

And here's an item that appeared separately in the 10-Q about possible funding for the FCPA matter:

Certain of our executive managing directors are in discussions with a Special Committee of our Board of Directors regarding a potential financing transaction of up to $500.0 million of perpetual preferred units, the proceeds of which would be used to fund payments in connection with our ongoing FCPA investigation and for general corporate purposes. The dividend rate on the units is expected to be 0% initially for three years, after which it is expected to increase over time and upon the occurrence of certain events to be agreed. The units would not be convertible into Class A Shares.

____

Richard L. Cassin is the publisher and editor of the FCPA Blog. He'll be the keynote speaker at the FCPA Blog NYC Conference 2016