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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

As highlighted in this 2018 post [1], in the aftermath of the 2016 Och-Ziff Foreign Corrupt Practices Act enforcement action (see here [2] and here [3] 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 [4], 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.

The ruling begins by noting that the parties did not meaningfully dispute that the offense to which Och-Ziff pleaded guilty – conspiracy to violate the FCPA – is an “offense against property” that can trigger restitution under the MVRA. Indeed, the judge found that the MVRA can apply to conspiracies to violate the FCPA depending on the manner in which the defendant commits the crime.

As stated by the court, the parties disagreed upon the following issues: (1) whether the court may order restitution after accepting Och-Ziff’s guilty plea; (2) whether Claimants are victims within the meaning of the MVRA; and (3) the extent to which Och-Ziff is liable for the losses Claimants suffered.

As to the first issue, the court concluded that while it accepted Och-Ziff’s guilty plea, “it has not yet accepted the parties’ plea agreement.”

As to the second issue, the court concluded that the MVRA defines victim broadly and “it contains no carve-out for holders of intangible property rights, such as shareholders who hold interests through special-purpose vehicles for tax purposes.” Further, the court stated, “individual can be victims under the MVRA even where they lack a private right of action against a defendant.” In short, the court concluded that the “Claimants lost a promising opportunity.”

As to the third issue (the extent to which Och-Ziff is liable for the losses Claimants suffered), the court concluded that there is sufficient evidence to support an award of restitution under the MVRA.

Regarding the restitution amount, the court noted that Claimant is seeking $1.8 billion, but concluded that “on the current record, the court is unprepared to decide how much restitution [Och Ziff] owes to Claimants. Accordingly, the court directed the parties to submit “supplemental briefing regarding how to calculate the appropriate restitution amount.”

 

[5]