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In Rejecting The Government’s Position, Court Finds Former Shareholders Of Africo Resources Ltd. Are “Victims” Of Och-Ziff’s Bribery

victim

As highlighted in this 2018 post, in the aftermath of the 2016 Och-Ziff Foreign Corrupt Practices Act enforcement action (see here and here for prior posts) former shareholders of Canadian mining company Africo Resources Ltd. (“Claimants”) sough restitution pursuant to the Mandatory Victims Restitution Act for losses allegedly incurred as a result of Och-Ziff’s bribery of corrupt officials in the Democratic Republic of the Congo.

The DOJ opposed the request arguing, among other things, that Claimants had not show direct or proximate causation of quantifable harm from Och-Ziff’s conduct and that damages were too speculative.

However in this recent ruling, Judge Nicholas Garaufis (E.D.N.Y.) found that Claimants are victims of Och-Ziff’s crime under the MVRA and “directed the parties to submit supplemental briefing regarding how to calculate the appropriate restitution amount.”

While each case is factually unique, the ruling is important as it may open a door to other business entities who lose out on opportunities because of the conduct of business organizations resolving an FCPA enforcement action.

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SEC’s FCPA Charges Against Former Och-Ziff Executives Cohen And Baros Dismissed

Judicial Decision

This previous post highlighted the SEC’s Foreign Corrupt Practices Act (and related) enforcement action against Michael Cohen and Vanja Baros (former Och-Ziff executives) based on the same core conduct as the DOJ and SEC’s September 2016 enforcement action against Och-Ziff.

The post noted that the meaty 80 page complaint against Cohen and Baros was a clear signal that a negotiated settlement was unable to be reached and that the defendants would put the SEC to its burden of proof. It was further noted that the SEC is rarely put to its burden of proof in FCPA enforcement actions (corporate or individual) and indeed has never prevailed in FCPA history when put to its ultimate burden of proof. Prior posts here and here summarized the issues in the motion to dismiss briefing.

Yesterday, in yet another blow to the SEC when put to its burden of proof in an FCPA enforcement action, Judge Nicholas Garaufis (E.D.N.Y.) dismissed the SEC’s complaint finding the SEC’s claims time-barred.

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The FCPA’s Impact On Raising Capital

raising capital

The 2014 article “FCPA Ripples” goes in-depth, using various case studies, to demonstrate how settlement amounts in an actual Foreign Corrupt Practices Act enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement. Numerous prior posts have done so as well (see here).

In addition to pre and post-enforcement action professional fees and expenses, market capitalization, credit ratings, M&A activity, lost or delayed business opportunities, and offensive use of the FCPA (to name just a few ripples) this post highlights how FCPA scrutiny and enforcement can also negatively impact a company’s ability to raise capital.

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Former Equity Holders Of Africo Resources Seek Designation As “Victims” Of Och-Ziff’s Bribery Schemes And Raise Concerns About The Underlying Settlement

victim

“Bribery is not a victimless crime.”

It is a common sentence in DOJ FCPA talking points (see here for instance).

If bribery is not a victimless crime, then why do FCPA fines and penalties simply go directly into the U.S. Treasury? Why are there generally no efforts to identify the victims of FCPA violations and to allow those victims to pursue legal remedies? As highlighted in this post, the U.S. government actually identified certain victims of Och-Ziff’s bribery schemes, but later backed off this determination perhaps because it complicated the DOJ’s efforts to resolve the matter.

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Former Och-Ziff Executive Cohen Criminally Charged – Including For Obstruction And Making False Statements In Connection With DOJ/SEC Investigation

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As highlighted in this prior post, in January 2017 former Och-Ziff executives Michael Cohen and Vanja Baros were civilly charged by the SEC with Foreign Corrupt Practices Act, and other, violations in connection with the same core conduct as the DOJ and SEC’s September 2016 enforcement action against Och-Ziff.

Recently, the DOJ unsealed criminal charges against Cohen. While some media sources have called the charges “bribery charges,” (see here for the Wall Street Journal article) this is false as Cohen was not charged with any FCPA offenses, but rather various fraud based offenses based on his role as an investment advisor. However, as detailed in this post, Cohen was also charged conspiracy to obstruct justice and making material false statements, charges at least indirectly related to the DOJ’s and SEC’s FCPA inquiry of Och-Ziff.

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