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Och-Ziff reserves $200 million for FCPA settlement, says bigger penalties ‘probable’

Och-Ziff Capital Management Group LLC said Tuesday it has reserved $200 million for a settlement of Foreign Corrupt Practices Act offenses arising from alleged bribes in Libya.

The hedge fund firm said it’s now discussing a resolution of criminal and civil charges with the DOJ and SEC.

Och-Ziff said the amount it set aside -- $200 million -- is "the minimum amount" of any potential settlement. The firm said "it is probable that the amount will be in excess of $200 million."

The disclosure came in Och-Ziff's Form 10-Q (Quarterly Report) filed with the SEC on May 3.

The firm said it also spent $15.9 million in professional fees during the quarter for the FCPA investigation.

Because of the FCPA-related charges, Och-Ziff reported a quarterly loss of $142.5 million.

Och-Ziff disclosed the FCPA investigation in March 2014.

It said then,

Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the U.S. Department of Justice (the “DOJ”) in connection with an investigation involving the FCPA and related laws. The investigation concerns 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.

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 $42 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.

The Wall Street Journal reported last month that the DOJ wants a guilty plea by Och-Ziff in the case. The report said the SEC is pushing for civil penalties of up to $400 million.

An enforcement action of more than $219 million would land Och-Ziff in the top ten FCPA cases of all time.

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

Cohen and an analyst who worked for him, Vanja Baros, received "Wells notices" from the SEC, the Wall Street Journal said.

A Wells notice advises targets of an investigation that the SEC staff has made a preliminary determination to recommend an enforcement action.

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

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The FCPA disclosure from the Form 10-Q by Och-Ziff Capital Management Group LLC filed on May 3, 2016 said:

As previously disclosed, since 2011, we have been investigated by the SEC and the DOJ concerning possible violations of the FCPA and other laws. While we are unable to predict the full scope, duration or outcome of the SEC and DOJ investigations, based on discussions with the SEC and DOJ, we believe that it is probable that the outcome would include the government pursuing civil and criminal sanctions. We recently have begun discussions with the SEC and DOJ concerning resolution of these matters. We accrued $200.0 million in connection with the disclosed investigations that we believe is the minimum amount of loss to be incurred. We believe it is probable that the amount will be in excess of $200.0 million, but we are unable to estimate an amount at this time. Any resolution could have a material adverse effect on our business, financial condition or results of operations.


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.