Hedge fund subsidiary sentenced in NY federal court; ordered to pay $135 million

On November 4, 2020, OZ Africa Management GP, LLC, a subsidiary of the New York-based hedge fund firm Sculptor Capital Management, Inc. (formerly known as Och-Ziff Capital Management), was sentenced in the US District Court for the Eastern District of New York.  Although OZ Africa pled guilty in 2016 to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, sentencing was delayed due to a request for restitution by former shareholders of Africo Resources Ltd.  These shareholders had argued that they lost their interest in a mine in the Democratic Republic of Congo (DRC), the Kalukundi mine, through two bribery schemes: (1) to bribe DRC officials in order to transfer Africo’s interest in the mine to OZ Africa, and obtain a default judgment in the DRC legitimizing the transfer, and (2) 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 the acquisition of Africo by a third party with funds invested by OZ.  In August 2019, the Court ruled that Africo shareholders were entitled to restitution under the Mandatory Victims Restitution Act.  On November 4, the Court ordered OZ Africa to pay about $135 million in restitution.  

Relatedly, on November 3, 2020, the DOJ filed a second amendment to Sculptor’s DPA.  The first amendment had extended the DPA until the resolution of OZ Africa’s sentencing.  The amendment filed on November 3 modified the DPA so that it would terminate once three conditions were met: (1) the Court entered a final judgement in the OZ Africa matter; (2) OZ Africa fully paid the restitution; and (3) the funds that Sculptor paid into a suspense account under the 2016 DPA were released to the US Treasury.     

Sculptor and OZ Africa had previously acknowledged paying millions of dollars in bribes to DRC and Libyan government officials from about 2005 to 2015 in order to obtain lucrative investment opportunities in both countries, including an interest in the Kalukundi mine in the DRC.  Sculptor entered into a DPA related to charges of conspiracy to violate the anti-bribery provisions of the FCPA, falsifying its books and records, and failing to implement adequate internal controls.  As discussed above, OZ Africa pled guilty to one count of conspiracy.  In resolving the DOJ and Securities and Exchange Commission investigations, Och-Ziff previously agreed to pay about $412 million in civil and criminal penalties aside from the restitution later ordered by the court.

 

Sculptor Form 10 Q | OZ Africa Judgment | OZ Africa Order | Och-Ziff DPA Amendment Letter | DOJ Press Release 2016

 

 

 

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