Och-Ziff Capital Management

Och-Ziff Capital Management Group LLC (DBA: OZ Management)
Public company
Traded as NYSE: OZM
Industry Hedge funds
Founded 1994 (1994)
Founder Daniel Och
Headquarters Solow Building
New York City, New York, United States
Key people
 Daniel Och, Chief Executive Officer
David Windreich, Head of U.S. and European Investing
Joel M. Frank, Chief Financial Officer and Senior Chief Operating Officer
Total assets $13 Billion as of February, 2017
Number of employees
 200+
Website www.ozm.com

Och-Ziff Capital Management Group (OZ Management) is an American hedge fund manager and global alternative asset management firm.[1] The firm operates multiple investment strategies, including merger arbitrage, convertible arbitrage, equity restructuring, credit and distressed investments, private investments, and real estate.[2] It has 400 employees worldwide including offices in New York City, London, Hong Kong, Mumbai, and Beijing.[3]

As of July 1, 2017, the firm has $31.8 billion in assets under management.[4][5]

Och-Ziff Capital Management Group was under investigation since 2011 in regard to the Foreign Corruption Practice Act (FCPA) for bribery and corruption in African countries over the period of 2008-2012.[6] On Thursday, September 29, 2016, following plea discussions, the company agreed to pay the Department of Justice and the U.S. Securities and Exchange Commission a total of $412 Million for criminal and civil violations.[7]

The terms of the SEC agreement meant that the company pled guilty to the charges of violating the Foreign Corrupt Practices Act and bribing senior government officials in several countries in Africa.[8]

SEC found CEO Dan Och responsible for Och Ziff's corruption and bribery violations. According to their investigation, he and other company executives, including CFO Joel M. Frank, were aware of potential corruption and ignored the risks,[9] thus violating the anti bribery books and records, and internal controls provisions of the Securities Exchange Act of 1934.[10] Following the corruption charges and ensuing settlement, Och Ziff clients withdrew up to $13 billion from the company.[11]

On March 14, 2017 Bloomberg reported that several key executives had left the company including James Keith Brown, partner and head of investor relations, Paula Drake, chief compliance officer, and Drew Gillanders a top European equity analyst.[12]

On March 20, 2017 S&P Global Ratings cut Och-Ziff’s investment rating to junk status.[13][14]

 

Structure

According to the company website,[15] Daniel Och is Chairman of the Board, and Chief Executive Officer.

OZ Management is a subsidiary of Och-Ziff Capital Management.[16] In January 2008 OZ Management, Tokyo Sexwale’s Mvelaphanda (Mvela) Holdings and Walter Hennig’s Palladino Holdings announced the creation of a new joint venture, Africa Management Limited.[16]

Mvela Holdings is a privately owned investment company founded in 1998 by Tokyo Sexwale, Mikki Xayiya and Mark Willcox. Mvela Holdings is the controlling shareholder of Mvelaphanda Group and has a significant interests in Mvelaphanda Resources.[17]

Palladino Holdings is based in Turks and Caicos in the British Virgin Islands.[18]

 

As part of the joint venture, Africa Management Limited established African Global Capital, as a vehicle for investment in both the private and public markets across Africa, focusing on natural resources and related opportunities.[16] Tokyo Sexwale, founder of Mvela, said: "We intend to build on our already strong foothold in African investments in partnership with Och-Ziff. The partnership with Och-Ziff in African Global Capital will help us accelerate in building the leading African investment firm.”[16] Africa Management Ltd., and OZ Management formed the foundation of Och-Ziff’s expansion and investment into natural resources in Africa.[19] The joint venture has investments in several African countries including South Africa, Guinea, Zimbabwe, Democratic Republic of Congo, Chad, Libya and Niger. Africa Management Ltd., was at the center of the SEC allegations, as well as ongoing investigations and corruption charges against OZ Management and Och-Ziff Capital Management.[20]

  

History

The firm was founded in 1994 by Daniel Och with financial support from the Ziff family, founders of Ziff Davis Media. William Ziff's sons Dirk, Robert, and Daniel manage the family's investments through Ziff Brothers Investments. Prior to founding the firm, Och was Head of Proprietary Trading in the Equities division at Goldman Sachs.[21]

The company completed an initial public offering in 2007, listing its shares on the New York Stock Exchange at $32. The firm was one of the few hedge funds and private equity companies that completed IPOs before the market downturn of 2007. Also in 2007 it became a founder member of the Hedge Fund Standards Board which sets a voluntary code of standards of best practice endorsed by its members.[22] The company's stock has declined significantly since the IPO, reaching a 2008 year-to-date low of $4.02.[23] On September 30, 2010, the stock was trading at $14.90.[24]

The firm is reported to have avoided large losses during the financial crisis of 2008 and institutional capital continued to allocate funds to the company through 2010.[25]

Part of the success of the IPO was due to the efforts of Michael Cohen who joined the firm in 1997 and moved to London to establish European investments and operations. At the time of the IPO, Cohen was among the top three highest paid employees of Och-Ziff.[26] He led the expansion into private equity investments and broadened the firm’s global reach, specifically with the strategic partnerships in Africa,[27] most notable of which is Africa Management Ltd. (AML).

During the SEC investigation, Och-Ziff distanced itself and laid much of the blame and corruption charges at the feet of two executives at Och-Ziff Capital Management Group - Cohen and his colleague Vanja Baros.[28][29][30]

  

However, even before Palladino and Mvela joined Och-Ziff to form AML, Och-Ziff loaned over $86 million to Walter Hennig, owner of Palladino, ostensibly to secure mining rights in Niger and Chad. According to the SEC investigation a portion of the funds were used to bribe senior government officials to facilitate the asset acquisition.[31]

On January 26, 2017, The SEC charged Cohen and Baros with leading an extensive bribery scheme that violated the FCPA.

According to the SEC’s complaint, the two caused tens of millions of dollars in bribes to be paid to high-level African government officials. As a result of their purported actions, the Libyan Investment Authority sovereign wealth fund invested in Och-Ziff managed funds. Cohen and Baros also allegedly worked to secure mining deals by bribing government officials in Niger, Congo, Chad, and Guinea.[32]

Criticism

Zimbabwe

In August 2012 the Mail & Guardian reported that Mvelaphanda (Mvela) Holdings, a joint venture between Tokyo Sexwale and OZ Management, was behind a USD100 million loan to the Zimbabwean political party Zanu-PF.[33]

Guinea

Och-Ziff and AML have been implicated in an investigation into election rigging[34]  which helped President Alpha Conde into power, and led to revisions in the Guinean mining code.[35][36] In August 2016, Samuel Mébiame was arrested by U.S federal prosecutors on bribery and corruption charges[37]  involving several African countries and connected to his ties with Hennig[38]  and the redrafting of the Guinean mining code. In his testimony, Mébiame admitted to bribing officials in Guinea.[39] Mébiame reported that he informed all partners in AML, including Och-Ziff that he had access to Guinea’s mining opportunities.[40][41]

 

Palladino Holdings and Mvelaphanda Holdings, affiliates of OZ Management, are connected to a corrupt $25 million loan scheme that Palladino paid to the state of Guinea in order to start up a state mining company in exchange for mining rights.[42]

Democratic Republic of Congo

Loans to companies in the DRC by Och-Ziff resulted in a criminal penalty against OZ Management,[43] effectively Och-Ziff Capital Management.[44][45]

 

Libya 

According to an investigation run by the Securities and Exchange Commission and the Department of Justice,[46] in 2007, the Libyan Investment Authority, which was controlled by Moammar Gadhafi, made a $300 million investment in Och-Ziff funds. To win this investment Och-Ziff paid Mohamad Ali Ajami, a London-based businessman with ties to Gadhafi. The money was funneled to the officials of Gadhafi's regime in order to seal the deal. Och-Ziff paid the fee knowing that it would be used for bribery. According to the charges, these dealings were overseen by head of European investing Michael L. Cohen.[30] In Och-Ziff's books and records, the broker's fee was noted vaguely as "Professional Services - Other."[47]

See also

References

  1. ↑ "Company Profile for Och-Ziff Capital Management Group LLC (OZM)". Bloomberg. Retrieved 3 June 2013.
  2. ↑ Och-Ziff (company website)
  3. ↑ Form 10-Q filing as with the U.S. Securities and Exchange Commission. November 4, 2010
  4. ↑ . March 17, 2011
  5. ↑ "The 2011 Hedge Fund 100 Ranking". Institutional Investor, Inc. May 12, 2011.
  6. ↑ "Och-Ziff Capital Management Archives - Page 3 of 4 - FCPA Professor". FCPA Professor. Retrieved 2017-04-25.
  7. ↑ Och-Ziff settles with SEC, DOJ for $412 million
  8. ↑ "Och-Ziff Capital Management Admits to Role in Africa Bribery Conspiracies and Agrees to Pay $213 Million Criminal Fine". www.justice.gov. Retrieved 2017-04-25.
  9. ↑ "Och-Ziff’s Sprawling Africa Bribery Network Laid Out by U.S.". Bloomberg.com. 2016-09-29. Retrieved 2017-04-25.
  10. ↑ Journal, Samuel Rubenfeld, The Wall Street. "SEC highlights CEO role in Och-Ziff bribery case". Retrieved 2017-04-25.
  11. ↑ "Och-Ziff Suffered $13 Billion in Withdrawals as Clients Fled". Bloomberg.com. 2017-02-15. Retrieved 2017-04-25.
  12. ↑ "Och-Ziff Executives Said to Leave After $13 Billion Withdrawn". Bloomberg.com. 2017-03-14. Retrieved 2017-04-25.
  13. ↑ "Och-Ziff Capital Management Group May Be Cut to Junk by S&P". Bloomberg.com. 2016-10-20. Retrieved 2017-04-25.
  14. ↑ Chang, Sue. "S&P downgrades Och-Ziff further into junk territory". MarketWatch. Retrieved 2017-04-25.
  15. ↑ Och-Ziff: Team (company website)
  16. 1 2 3 4 Och-Ziff, "Press Releases", Och-Ziff (29 January 2008)
  17. ↑ "News -  Press Releases - Och-Ziff Capital Management Group". shareholders.ozcap.com. Retrieved 2017-04-25.
  18. ↑ "Palladino Holdings Ltd.: Private Company Information - Bloomberg". www.bloomberg.com. Retrieved 2017-04-25.
  19. ↑ LLC, Och-Ziff Capital Management Group. "Mvelaphanda Holdings, Och-Ziff and Palladino Create Joint Venture to Focus on Natural Resources in Africa". www.prnewswire.co.uk. Retrieved 2017-04-25.
  20. ↑ Stevenson, Alexandra (2016-09-29). "Och-Ziff to Pay Over $400 Million in Bribery Settlement". The New York Times. ISSN 0362-4331. Retrieved 2017-04-25.
  21. ↑ "Our Firm - Leadership - Partner Management Committee and Executive Officers - Daniel S. Och - Och-Ziff Capital Management Group". www.ozcap.com. Retrieved 2017-04-25.
  22. ↑ "Hedge Fund Standards Board". www.hfsb.org. Retrieved 2017-04-25.
  23. ↑ http://www.hoovers.com/och-ziff-capital-management/--ID__157641--/free-co-factsheet.xhtml
  24. ↑ "OZM Historical Prices | Och-Ziff Capital Management Gro Stock - Yahoo Finance". Retrieved 2017-04-25.
  25. ↑ "Analysis | HFM Week | An HFM network". www.hfmweek.com. Retrieved 2017-04-25.
  26. ↑ "Accounts reveal huge dividends paid to hedge fund tycoon Michael Cohen". The Independent. 2014-12-08. Retrieved 2017-04-25.
  27. ↑ "Och-Ziff Plea Halts Rise of Hedge-Fund Billionaire’s Protege". Bloomberg.com. 2016-09-30. Retrieved 2017-04-25.
  28. ↑ "Dan Och’s African Nightmare". www.institutionalinvestor.com. Retrieved 2017-04-25.
  29. ↑ "The London connection: Former UK boss of Wall Street hedge fund could". The Independent. 2014-06-19. Retrieved 2017-04-25.
  30. 1 2 "Subscribe to read". www.ft.com. Retrieved 2017-04-25.
  31. ↑ "Dan Och’s African Nightmare". www.institutionalinvestor.com. Retrieved 2017-04-25.
  32. ↑ "SEC.gov | SEC Charges Two Former Och-Ziff Executives With FCPA Violations". www.sec.gov. Retrieved 2017-04-25.
  33. ↑ Gagare, Stefaans Brümmer, Craig McKune & Owen. "The investor who saved Mugabe". The M&G Online. Retrieved 2017-04-25.
  34. ↑ "Hedge fund to pay $413m for bribery case in major step forward in corruption fight – Global Witness response | Global Witness". Global Witness. Retrieved 2017-04-25.
  35. ↑ Brümmer, Craig McKune, Stefaans. "SA politicians and spies named in Guinea ‘mines-for-votes’ rumpus". The M&G Online. Retrieved 2017-04-25.
  36. ↑ Today, FCPA (2016-08-21). "Och-Ziff’s arrested Africa agent (literally) wrote Guinea’s mining law". FCPA Today. Retrieved 2017-04-25.
  37. ↑ Stevenson, Alexandra (2016-08-16). "Bribery Arrest May Expose African Mining Rights Scandal Tied to Och-Ziff". The New York Times. ISSN 0362-4331. Retrieved 2017-04-25.
  38. ↑ Matthews, Christopher M. (2016-08-16). "U.S. Charges Gabonese Fixer Tied to Hedge Fund Och-Ziff With Bribery". Wall Street Journal. ISSN 0099-9660. Retrieved 2017-04-25.
  39. ↑ "Subscribe to read". www.ft.com. Retrieved 2017-04-25.
  40. ↑ "Och-Ziff Said to Be Tied to Gabonese Fixer in Bribery Case". Bloomberg.com. 2016-08-16. Retrieved 2017-04-25.
  41. ↑ "U.S. charges Gabonese man for bribe scheme involving hedge fund". Reuters. 2017-08-17. Retrieved 2017-04-25.
  42. ↑ Fortson, Danny. "Secret deal threatens big miners". Retrieved 2017-04-25.
  43. ↑ "Form 8-K". www.sec.gov. Retrieved 2017-04-25.
  44. ↑ Carreyrou, John (2014-04-28). "Och-Ziff Loans Financed Controversial Congo Deals". Wall Street Journal. ISSN 0099-9660. Retrieved 2017-04-25.
  45. ↑ https://www.efis.psc.mo.gov/mpsc/commoncomponents/viewdocument.asp?DocId=935862077
  46. ↑ "Subscribe to read". www.ft.com. Retrieved 2017-04-25.
  47. ↑ "TRACE Compendium - OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC". www.traceinternational.org. Retrieved 2017-04-25.
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