The shoe that many were waiting for finally dropped.
On Thursday the U.S. Securities and Exchange Commission filed suit against two former Och-Ziff Capital Management Group employees, accusing them of being the driving force behind a far-reaching African bribery scheme which violated the Foreign Corrupt Practices Act (FCPA.)
The charges were filed against Michael Cohen, ex-head of Och-Ziff’s European business, and Vanja Baros, formerly a private equity analyst for the hedge fund. In September, Och-Ziff had paid a $213 million U.S. Department of Justice criminal penalty and a $199 million SEC resolution to resolve charges of bribery relating to Cohen and Baros’s alleged dealings in Africa. That fine was the fourth-largest FCPA settlement in history.
While the suit against Cohen and Baros opens an old wound for Och-Ziff, there is also an element of vindication. The SEC’s case lays out how Cohen and Baros allegedly took pains to hide their actions from their hedge fund bosses, including CEO Daniel Och. In a statement announcing the charges, Kara Brockmeyer, head of the SEC’s FCPA unit, said that “Cohen and Baros were the masterminds of Och-Ziff’s bribery scheme that improperly used investor funds to pay bribes through agents and partners to officials at the highest levels of foreign governments.” Och-Ziff investor funds allegedly went to pay bribes and influence corrupt government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo.
The SEC is seeking a jury trial.
According to the 80-page complaint, Cohen’s questionable dealings in Africa began in or about 2007, when the then-head of Och-Ziff Europe began seeking ways to obtain clients and investment opportunities from Libya. The North African country was at that time under the dictatorship of colonel Muammar Gaddafi. Cohen, a U.S. citizen, was able to secure $300 million from the Libyan Investment Authority (LIA) sovereign wealth fund, then run by Gaddafi officials with ties to the colonel’s family. According to the complaint, the agent whom Cohen hired to secure the investment “paid more than $3 million in bribes to Libyan government officials in connection with securing and retaining the LIA investment for Och-Ziff.”
Cohen and Baros’s alleged activities, however, quickly spread to other countries on the continent. The complaint claims that “beginning in 2007 and continuing through at least August 2012, Cohen and Baros executed a sprawling scheme involving serial corrupt transitions and bribes.” This included making $86 million in loan payments to a South African partner in an Och-Ziff subsidiary, African Global Capital I, money used primarily for bribes to high-ranking officials, illicit payments to middlemen, the personal benefit of Och-Ziff’s business partners, and “expenditures unrelated to investments.”
Och-Ziff declined to comment on the SEC’s charges against its former employees.
Morrison Foerster attorney Ronald White, acting for Michael Cohen, wrote in an e-mail: “Michael Cohen has an unblemished reputation built over the course of a career spent creating value for Och-Ziff’s investors. Mr. Cohen has done nothing wrong and is confident that when all the evidence is presented it will be shown that the SEC’s civil charges are baseless.”
Baros’s counsel could not be reached.
