Russian-Canadian National Pleads Guilty to Conspiracy to Launder Money from Scheme to Send UAV and Missile Components to Russia in Violation of U.S. Sanctions
BROOKLYN, NY – The U.S. Attorney’s Office for the Eastern District of New York and the Criminal Division, Fraud Section are prosecuting a New-York alternative investment and hedge fund manager, Och-Ziff Capital Management Group, LLC (Och-Ziff), which has agreed to pay a $213 million criminal penalty and enter into multiple criminal resolutions with the Department of Justice to resolve charges related to widespread bribery of officials in Libya and the Democratic Republic of Congo. As part of the resolution, Och-Ziff, the publicly traded parent company, entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice. An Och-Ziff subsidiary, OZ Africa Management GP, LLC (OZ Africa), pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA). Today’s guilty plea and proceedings in connection with the DPA took place before United States District Judge Nicholas G. Garaufis in the U.S. District Court for the Eastern District of New York. Sentencing for OZ Africa has been scheduled for March 29, 2017, at 2:00pm.
U.S. Attorney Robert L. Capers of the Eastern District of New York, Principal Deputy Assistant Attorney David Bitkower of the Justice Department’s Criminal Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Richard Weber, Chief, Internal Revenue Service, Criminal Investigation (IRS-CI), made the announcement.
“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad, and Niger. Despite knowing that bribes were being paid to senior government officials, Och-Ziff repeatedly funded corrupt transactions. One Och-Ziff employee was so bold as to order the removal of language from their African joint venture’s internal audit report that called for an investigation of suspected bribery payments by a business partner. Today’s corporate resolutions, which include a more than $213 million criminal penalty and an independent compliance monitor, hold Och-Ziff accountable for placing profits above the law and will help ensure that the conduct brought to light here never happens again at this company,” stated United States Attorney Capers.
“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower. “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa. By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”
“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form,” said FBI Assistant Director in Charge Sweeney. “Doing so with the intention of influencing a foreign official in his or her capacity is nothing short of corruption. In this scheme, payments of millions of dollars were paid out to senior officials within certain parts of Africa in exchange for access to profitable investment opportunities. This type of behavior can’t and won’t be tolerated. I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”
“Today’s plea and deferred prosecution agreement result from the unraveling of complex financial transactions orchestrated by Och-Ziff Capital Management Group, LLC and its subsidiary to facilitate illegal payments to foreign government officials,” said IRS-CI Chief Weber. “IRS-CI will continue to investigate pervasive bribery schemes used by corporations in the pursuit of attractive international investment opportunities.”
Under the DPA, Och-Ziff admitted to multiple conspiracy charges in a four-count criminal information, including two counts of conspiracy to violate the anti-bribery provisions of the FCPA, one count of falsifying its books and records and one count of failing to implement adequate internal controls. Additionally, OZ Africa pleaded guilty to conspiring to bribe senior officials in the Democratic Republic of Congo in connection with obtaining valuable mining concessions. Collectively, Och-Ziff and OZ Africa agreed to pay a criminal penalty of $213,055,689, and Och-Ziff agreed to retain an independent compliance monitor for a period of three years.
The DRC Bribery Scheme
Between 2005 and 2012, a businessman operating in the DRC with significant interests in the diamond and mining sectors in the DRC paid more than one-hundred million dollars in bribes to DRC officials for special access to attractive investment opportunities. In late 2007, Och-Ziff employees began discussions to partner with the businessman based upon his special access to these investment opportunities. Between 2008 and 2011, Och-Ziff entered into several DRC-related transactions with this businessman despite the fact that at least two Och-Ziff employees knew, and a senior Och-Ziff employee believed it was likely, that the businessman gained access to these attractive investment opportunities by making corrupt payments to government officials. Och-Ziff personnel funded these transactions understanding that Och-Ziff’s funds would be used in part to pay substantial sums of money to high ranking DRC officials to secure access to and preferential treatment for the investment opportunities. In late 2008, after an Och-Ziff employee was alerted that an audit of the businessman’s records revealed payments for DRC officials, that employee instructed that any references to those payments be removed from a final report of the audit. The businessman did, in fact, make corrupt payments to and for the benefit of DRC officials to secure the investment opportunities.
The Libya Bribery Scheme
Separately, but also beginning in 2007, a senior Och-Ziff employee engaged a third-party agent to assist the company in securing an investment from the Libyan sovereign wealth fund, the Libyan Investment Authority (LIA). At the time of the engagement, the senior Och-Ziff employee knew that the agent would need to make corrupt payments to Libyan officials to secure that investment. The agent was engaged without formal approval by Och-Ziff and without any due diligence conducted on the agent by Och-Ziff. From February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between the senior Och-Ziff employee and the Libyan official who was empowered to make investment decisions for the LIA. In late November 2007, Och-Ziff received a $300 million investment from the LIA into Och-Ziff hedge funds. Shortly thereafter, Och-Ziff entered into a consulting agreement to pay a sham “finder’s fee” of $3.75 million, knowing that all or a portion of the fee would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment. The agent did in fact make corrupt payments to and for the benefit of Libyan officials to influence the LIA’s investment.
Internal Controls Failures and Falsified Books and Records
Further, Och-Ziff admitted that it knowingly and willfully falsified and caused to be falsified records related to its retention and payment of the agent in Libya. The falsified records concealed the true purpose of the payments, which purported to be for consulting purposes, but which actually would be used for corrupt payments to Libyan officials in return for their assistance in obtaining the LIA’s investment. Och-Ziff also failed to implement and maintain an adequate system of internal accounting controls designed to detect and prevent the misappropriation of assets by its employees, agents, and business partners. As a result, the company failed to prevent bribe payments from being made in the DRC, Libya, as well as in Chad and Niger, where an Och-Ziff joint venture made mining-related investments. For all the criminal conduct included in these resolutions, Och-Ziff reaped more than $210 million in illegal profits.
The Corporate Resolutions
The Department entered into this resolution, in part, due to Och-Ziff’s failure to voluntarily self-disclose the offense conduct and the seriousness of the conduct including the high-dollar amount of bribes paid to foreign officials and involvement by a high level employee within Och-Ziff. Notwithstanding, Och-Ziff received a 20 percent reduction off the bottom of the U.S. Sentencing Guidelines range for its cooperation with the government’s investigation. Och-Ziff also committed to continue to enhance its compliance program and internal controls, to cooperate with the Department in ongoing investigations, and to retain an independent compliance monitor pursuant to the terms outlined in the DPA.
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In connection with the government’s investigation, Samuel Mebiame, a Gabonese national, was charged on August 16, 2016, by criminal complaint with conspiring to bribe foreign government officials to obtain mining rights in Chad and Niger, as well as Guinea. According to documents filed in court, Mebiame worked as a “fixer” for a mining company that was owned by a joint venture between Och-Ziff and a Turks & Caicos incorporated entity. In that capacity, Mebiame paid bribes to high-ranking government officials in Niger and Chad to obtain the mining rights. During the charged conspiracy, Mebiame repeatedly traveled to the United States to further the scheme, including to meet with coconspirators at the Plaza Hotel in New York and to start companies and open bank accounts through which he could receive international wire transfers from coconspirators.
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In a parallel proceeding announced today, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Och-Ziff Capital Management Group LLC and OZ Management LP, whereby Och-Ziff agreed to pay approximately $199 million in disgorgement to the SEC, including prejudgment interest. The total amount of the global resolution is thus approximately $412 million.
The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case. The department appreciates the significant cooperation and assistance provided by the SEC in this matter. The Swiss Federal Office of Justice, the British Virgin Islands Central Authority, the Maltese judicial authorities and authorities in Jersey and Guernsey also provided assistance.
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The case is being prosecuted by Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax, and David Pitluck of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, and Assistant Deputy Chief Leo Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.
 The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.