“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.
This 26 page letter from Morris Fodeman and Michael Sommer (Wilson Sonsini) was recently placed on the docket in the Och-Ziff enforcement action. In pertinent part, the letter states (internal citations omitted):
“We represent more than fifty former equity holders of Africo Resources Limited, (the “Africo Owners”), victims of the extensive bribery scheme to which defendant OZ Africa Management GP, LLC (“Och-Ziff Africa”) pled guilty. As the Department of Justice (“DOJ”) and Federal Bureau of Investigation (“FBI”) previously acknowledged, the Africo Owners were harmed by the defendant’s outrageous criminal conduct and are entitled to restitution under the Mandatory Victims Restitution Act. Unfortunately, at the urging of OchZiff Africa’s team of lawyers, and fearful that the plea bargain and the $213,055,689 fine it secured would be jeopardized should it pursue restitution on our clients’ behalf, the DOJ has reversed course and informed us for the first time on January 30, 2018 that it has “preliminarily” concluded that our clients are not victims of the defendant’s crimes. The DOJ has abdicated its legal obligations under the MVRA, and instead puts its own interests – and those of the defendant – ahead of victims. We are thus forced to write to Your Honor directly so that the Court can assure that the mandate of the MVRA is met – to make our clients whole through an Order of Restitution, and hold the defendant accountable for the significant harms caused by its crimes when it is sentenced.”
As highlighted in this prior post, the Och-Ziff enforcement action included (on the DOJ side) a plea agreement by OZ Africa Management GP LLC (OZ Africa – a wholly-owned subsidiary of OZ Management LP, which is a subsidiary of Och-Ziff) to a one-count criminal information charging conspiracy to violate the FCPA’s anti-bribery provisions and a deferred prosecution agreement with Och-Ziff to resolve two counts of conspiracy to violate the FCPA’s anti-bribery provisions, one count of falsifying books and records and one count of failing to implement adequate internal controls. As to this resolution, the letter states:
“In reality, however, the agreements the government struck did not come close to holding Och-Ziff accountable. Indeed, despite the fact that Och-Ziff had used its economic might to pay more than $100 million in bribes to judges and other government officials so that it could exploit economically challenged third-world countries and victimize the Africo Owners, Och-Ziff astonishingly faced no meaningful consequences at all. First, Och-Ziff was allowed to serve up an empty, business-irrelevant shell subsidiary, OchZiff Africa, to plead guilty. Neither Och-Ziff itself, nor a single officer, director, or employee, were ever charged with any crime, despite the fact that the illegal conduct at issue was carried out by, and with the knowledge of, some of the highest ranking executives at the company over the course of many years.
[…]
Despite the fact that according to the DPA, the “value of the benefit” received by Och-Ziff through its illegal schemes was $221,993,010, inexplicably, Och-Ziff was not required to forfeit its ill-gotten gains. The $213 million “monetary penalty” the DOJ agreed to accept (and promised would be held in escrow to be applied toward any eventual fine this Court imposed against Och-Ziff Africa at its sentencing) was well below the low-end of the $266,319,612 to $532,639,224 fine called for by the Federal Sentencing Guidelines, equal to about 12 weeks’ worth of Och-Ziff’s revenue, and, perhaps most shockingly, significantly less than a single 33-year old Och-Ziff executive’s compensation package.
As for Och-Ziff Africa, the government agreed to recommend to Your Honor that it should face no punishment at all. Under the terms of a plea agreement made pursuant to Federal Rules of Criminal Procedure Rule 11(c)(1)(C), the government promised to recommend that, in exchange for its guilty plea to a single count of conspiracy to violate the FCPA, waiver of its right to appeal, and continued cooperation, Och-Ziff Africa should pay zero fine, forfeit none of its ill-gotten gains, and suffer no further penalty so long as Och-Ziff paid the $213 million “monetary penalty” called for under its DPA. While Och-Ziff Africa did agree that “any fine or restitution imposed by the Court would be due and payable within ten (10) business days of sentencing,” no specific restitution amount is called for under either agreement. Needless to say, none of the Africo Owners were consulted or informed about the DOJ’s plea bargain with Och-Ziff or Och-Ziff Africa, as required under the Crime Victims’ Rights Act. In fact, the Africo Owners learned there was an investigation related to Kalukundi only when they read about Och-Ziff’s guilty plea and settlement in the press when they were publicly announced by the DOJ on September 29, 2016.”
The letter next discusses how the government notified certain Africo Owners that they may be victims of Och-Ziff’s bribery schemes.
“Despite failing to confer with the victims before entering into its plea bargains with Och-Ziff and Och-Ziff Africa, the government eventually did notify the Africo Owners of their status as victims of Och-Ziff’s crimes on repeated occasions in the months that followed. First, in December 2016, three months after Och-Ziff Africa’s guilty plea, Special Agent Jeff Grove of the FBI, the lead case agent on the Och-Ziff investigation, emailed Dr. Anthony Harwood, an Africo Owner and its former President and CEO. Agent Grove explained in his email that he was investigating allegations of corrupt payments to government officials in the DRC surrounding mining deals, and that he “under[stood] that you [Dr. Harwood] and your company at the time, Africo, may have been a victim regarding some of those corrupt payments.” Agent Grove requested that Dr. Harwood meet with him to discuss the case, and his experiences with those involved in the DRC court case. Dr. Harwood made himself available and was interviewed by Agent Grove on January 11, 2017 at the U.S. Embassy in Pretoria, South Africa. Shortly after Dr. Harwood met with the FBI to discuss this case and to confirm the FBI’s understanding of how he and the other owners of Africo had been victimized, the undersigned counsel was retained by Dr. Harwood and the other Africo Owners. In multiple ensuing conversations, the lead Eastern District of New York Assistant United States Attorney (“AUSA”) handling the Och-Ziff case confirmed that, at least in his view, the Africo Owners certainly appeared to be victims under the MVRA, and invited further submissions on the subject. On March 24, 2017, the undersigned counsel wrote to the EDNY AUSA and the DOJ Trial Attorney assigned to the prosecution to confirm our understanding that the Africo Owners were victims and would be afforded all of the rights to which they are entitled under the MVRA and CVRA. In response, on April 25, 2017, the undersigned received the attached Victim Notification Notice (“VNN”) from the Victim Witness Coordinator for the United States Attorney’s Office, prepared at the direction of the EDNY AUSA.
[…]
Thereafter, the undersigned learned from discussions with the government that Och-Ziff and its lawyers were taking the position that the parties’ Rule 11(c)(1)(C) plea bargain did not contemplate Och-Ziff Africa’s payment of restitution and that the defendant was not properly advised of that possibility during its allocution. For these reasons, we understand that Och-Ziff’s counsel argued to the government that Och-Ziff Africa should be relieved of any restitution payment obligation, and if the Court disagreed and ordered restitution beyond the amount of the fine Och-Ziff had paid (which fine must first be applied to restitution), Och-Ziff Africa would then have the right to withdraw its guilty plea. Emphasizing the DOJ’s failure to include restitution in the plea agreement and the prospect of the DOJ being required to relinquish its $213 million penalty payment to the victims of Och-Ziff Africa’s crime, Och-Ziff began lobbying the DOJ to reverse course and conclude that the Africo Owners were now not victims after all. At the government’s request, the Africo Owners provided the government with well-established legal precedent and the factual bases to support the government’s initial and repeated conclusion that the Africo Owners were victims of Och-Ziff Africa’s crime and that they had suffered a significant, compensable loss. At the DOJ’s request, we also provided it with the report of a mining valuation expert, Dr. Neal Rigby, which formed the basis for the Africo Owners’ restitution claim. At the same time, we understand from the DOJ that Och-Ziff’s counsel advanced to the DOJ a laundry list of additional arguments as to why the Africo Owners should not be treated as victims. According to Och-Ziff, if the DOJ embraced any of these arguments, it would allow the DOJ to preserve the plea deal it had struck and keep the $213 million penalty exclusively for the government, with no restitution in any amount being paid to the Africo Owners or any other victim of Och-Ziff’s crimes. In other words, Och-Ziff advocated that its conduct should be viewed by the DOJ as a “victimless crime,” and the benefit to the DOJ would be both to allow the DOJ to save face in connection with its failure to include a specific restitution amount in the plea agreement and keep all the money for itself that would otherwise go to victims. The “victimless crime” theory advanced by Och-Ziff had an additional benefit to the DOJ: in both the DPA and Plea Agreement, the DOJ represented to the Court that the $213 million penalty would be held in escrow pending the sentencing of Och-Ziff Africo by Your Honor. Notwithstanding that representation, we have learned that the money is not in the escrow account and has instead been deposited with the Treasury for the government’s use. By embracing Och-Ziff’s “victimless crime” theory, the added benefit was that the DOJ might avoid scrutiny for its failure to abide by its escrow representations to the Court. Over the course of the next nine months, the DOJ repeatedly advised us that it was assessing its position. Finally, after seemingly endless urging from the undersigned, the DOJ informed us on January 30, 2018, that its new “preliminary conclusion” was that the Africo Owners were not victims and thus were not entitled to restitution under the MVRA. The DOJ refused to put the basis for its conclusion in writing, instead reading to the undersigned a statement purportedly explaining the reasons for the government’s about face. For the many reasons set forth below, the government’s newfound position is completely inconsistent with the law, a complete abdication of its responsibilities under the MVRA, and flies in the face of the facts of this case, not to mention the positions the DOJ has consistently taken in countless other cases.”
In conclusion, the letter states:
“To say that we are dismayed at the DOJ’s reversal of its position that the Africo Owners are victims under the MVRA would be an understatement of significant dimension. But more troubling than the about-face itself are the arguments the DOJ has adopted from Och-Ziff and the obvious motivation the DOJ had to adopt those arguments. As set forth above, these arguments are insincere, at odds with the facts, and repugnant to the law.”
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