EDNY holds that shareholders are entitled to restitution from convicted FCPA defendant

On August 29, 2019, the US District Court for the Eastern District of New York issued an opinion finding that several dozen former shareholders (Claimants) of Canadian mining company Africo Resources Ltd. (Africo) were entitled to restitution from OZ Africa Management GP, LLC (OZ).  In February 2018, the former Africo shareholders filed a claim for restitution against OZ pursuant to the Mandatory Victims Restitution Act (MVRA) for losses resulting from Africo’s bribery of officials in the Democratic Republic of the Congo (DRC).  The shareholders claimed that they lost their interest in the Kalukundi mine through two bribery schemes: one to bribe DRC officials in order to transfer Africo’s interest in the mine to OZ, and obtain a default judgment in the DRC legitimizing the transfer, and the other to bribe judges and other DRC officials to affirm the default judgment and postpone announcement of the affirmation until after the shareholders had voted on a resolution approving acquisition of Africo by a third party with funds invested by OZ..  

OZ pleaded guilty in September 2016 to conspiracy to violate the anti-bribery provisions of the FCPA by bribing DRC officials.  OZ admitted to paying more than $100 million in bribes to DRC officials to “obtain special access to and preferential prices for opportunities in the government-controlled mining sector in the DRC.”  OZ did not pay any fine as OZ’s ultimate parent company, Och-Ziff Capital Management Group LLC, entered into a deferred prosecution agreement, which included an agreement to pay a monetary penalty of $213,055,689.  The plea agreement did not specify that OZ would pay any restitution, but did say that “any fine or restitution imposed by the Court will be due and payable within ten (10) business days of sentencing.”  Two weeks before OZ was scheduled to be sentenced, the shareholders filed their claim for restitution.  

OZ presented several arguments against the Claimaints’ restitution claim.  First, it argued that “once the court has accepted a guilty plea under Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, it may not change the terms of the plea agreement at sentencing.”  The court rejected this argument as it had accepted OZ’s plea, not the plea agreement.  The court had advised OZ that it still had to approve the plea agreement, and if the court did not, OZ could withdraw its plea.  Second, OZ argued that the court had failed to warn the defendant of the possibility of restitution during the plea colloquy, as required by the Federal Rules.  The court rejected this argument by citing precedent holding that a failure to address restitution in the plea colloquy is cured where the defendant becomes aware of the possibility of restitution before sentencing, yet chooses not to withdraw the plea. 

Noting that, with some exceptions, the MVRA requires the payment of restitution by a defendant convicted of a property offense committed by fraud or deceit that has caused an identifiable victim to suffer pecuniary loss, the court also rejected OZ’s assertions that the Claimants do not qualify as victims under the MVRA, and that the shareholders’ lost interest in mining rights did not constitute property within the meaning of the statute.

Finally, the court rejected OZ’s argument that it should not be required to pay restitution for harm arising from conduct that took place before it joined the conspiracy.  Specifically, the court cited to United States v. Bengis to support its holding that under the MVRA, a defendant is liable for restitution for the prior acts of co-conspirators if it “knew or reasonably should have known about some or all of the conspiracy’s past imports.”  The court held that OZ knew or should have known about the corrupt acquisition of control of the Kalukundi mining rights. 

The $1.8 billion in restitution claimed by the shareholders represents the value of Africo’s share in the Kalukundi mine, had it been developed as planned.  The DOJ opposed the request for restitution on two grounds: (1) that Claimants had not shown direct or proximate causation, as the “major basis” for the losses sustained by Claimants was not the bribery scheme and (2) the damages requested were “too speculative.”  The court rejected the first argument but declined to make a determination on the second.  Instead, it requested further briefing as to the restitution calculations and whether awarding restitution would complicate or prolong the sentencing process to an extent that would outweigh the need to provide restitution.  On September 6, 2019, OZ moved for reconsideration of the court's order.

Memorandum opinion and order

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