Och-Ziff Execs Charged with Spearheading African Bribery Scheme

The US Securities and Exchange Commission (SEC) charged Och-Ziff’s two former executives for leading and directing the bribery scheme involving African government officials.

Michael Cohen, the hedge fund’s ex-chief of the European office, and Vanja Baros, an investment executive who worked on African deals, were the “driving forces” behind the alleged crime, the SEC claimed.

“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,” said Kara Brockmeyer, the chief of the SEC’s Foreign Corrupt Practices Act (FCPA).

According to the SEC, Cohen and Baros’ “misconduct” violated the FCPA by not only “inducing” the Libyan Investment Authority sovereign fund to invest in Och Ziff’s funds, but also paying bribes to “corruptly influence” officials in Chad, Niger, Guinea, and the Democratic Republic of the Congo.

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The two charges come after Och-Ziff paid a large settlement of more than $400 million regarding these violations last September to the SEC and the Department of Justice.

“This has been a deeply disappointing episode,” Daniel Och, Och-Ziff’s CEO, said in September. “This conduct is inconsistent with our core values and not representative of our hundreds of employees worldwide, who are dedicated to serving our clients with the utmost integrity. We have learned from this experience and taken significant steps to strengthen Och-Ziff.”

The SEC said it is pursuing “monetary penalties” against Cohen and Baros.

President Trump’s immediate freeze on all pending government regulations has industry experts wondering how it might affect asset managers’ strategies, the fate of the Dodd-Frank Act, and the Department of Labor’s (DOL) new fiduciary rule.

“It may change some of their specific tactics, depending on the types of managers they’ve hired, or are planning to hire, or their internal forecasts,” said James Allen, head of capital markets policy at CFA Institute. “But there are myriad possibilities here, and this shouldn’t affect strategies.”

And while the freeze isn’t unprecedented—President Obama also froze all pending regulations when he first took office—Allen says there are a few differences to consider.

“First, the freeze will apply to the long list of legislative mandates from Dodd-Frank and the JOBS [Jumpstart Our Business Startups] Act that haven’t yet been fully implemented,” he said.

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In addition, more recent regulatory focus has been directed at asset managers and at ways to address perceived systemic risks. “The level of focus on asset managers has certainly been different relative to the recent past,” Allan said.

The temporary freeze doesn’t affect the DOL’s fiduciary rule, which legally binds financial professionals working with retirement plans as fiduciaries. Although the rule isn’t slated to be fully implemented until April, it was made effective last June, and therefore isn’t subject to the freeze.

However, the fiduciary rule is not yet safe from the Trump administration’s anti-regulation movement. For example, the new secretary of labor can overturn the rule, said John Coffee Jr., director of Columbia Law School’s Center on Corporate Governance.

“The Department of Labor may not really enforce it, and I’m not sure if there are any legal remedies,” said Coffee. “The president and secretary of labor could wind up in court, although frankly that generally doesn’t happen.”

Although Trump would have less control over deregulation at agencies such as the Securities and Exchange Commission, which is not subject to presidential direction, Coffee argued the president is not without recourse.

“The president can reduce their budgetary appropriations if he found them uncooperative, or if they oppose him,” said Coffee. “It’s one hell of a deterrent.”

—Michael Katz