Former Och-Ziff London partner charged by SEC
Two ex-hedge fund executives accused of violating anti-corruption law
Two former Och-Ziff executives have been charged with directing a scheme to win the hedge fund business in at least five African countries by paying “tens of millions of dollars” in bribes to government officials.
The Securities and Exchange Commission on Thursday filed a civil suit accusing Michael Cohen, 45, and Vanya Baros, 44, of violating the Foreign Corrupt Practices Act and misrepresenting their African deals to investors over a five-year period beginning in 2007.
The two men “executed a sprawling scheme involving serial corrupt transactions and bribes paid to high-ranking government officials” in Libya, Chad, Niger, Guinea and the Democratic Republic of Congo, the SEC alleged.
“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, chief of the SEC’s FCPA unit.
The complaint says that Mr Cohen, a former London-based Och-Ziff partner, “spearheaded and participated in all of the corrupt transactions” while Mr Baros, a former analyst in the fund’s European office, participated in “multiple” illicit deals.
The SEC moves come four months after Och-Ziff paid $413m to settle related SEC charges and a subsidiary pleaded guilty to criminal violations as part of a deferred prosecution agreement with the US Department of Justice. Two of the company’s most senior executives also settled charges, including founder David Och, who paid $2.2m without admitting wrongdoing.
While US authorities have stepped up anti-bribery enforcement and have vowed to prosecute executives along with corporations, charges against individuals remain rare. The DoJ did not announce any criminal charges on Thursday against the pair. The SEC said it is seeking monetary penalties and unspecified additional remedies.
Mr Cohen’s attorney, Ronald White of Morrison Foerster, said: “Michael Cohen has an unblemished reputation built over the course of a career spent creating value for Och-Ziff’s investors. Mr Cohen has done nothing wrong and is confident that when all the evidence is presented it will be shown that the SEC’s civil charges are baseless.”
Mr Baros’s attorney, Mark Cohen, said: “Vanya Baros is a highly respected professional with an exemplary record of service and integrity. The allegations in the SEC’s complaint about Mr Baros are without basis. When the facts come out, it will be clear that Mr Baros did nothing wrong.”
Working through agents with “reputations for engaging in unsavory business practices”, Mr Cohen and Mr Baros used investors’ money rather than Och-Ziff’s own capital to bribe government officials, the complaint says.
In 2007, Mr Cohen funnelled more than $3m in bribes to Libyan officials, including a son of former Libyan leader Muammer Gaddafi, to secure a $300m investment from the Libyan Investment Authority (LIA) into the Och-Ziff hedge funds, the complaint says. The Gaddafi relative is not named in the complaint, but has been identified in separate court proceedings as Seif al-Islam Gaddafi, once regarded as his father’s heir apparent.
Mr Cohen also invested $40m of Och-Ziff funds in a Libyan real estate deal that involved Gaddafi’s son and thus enjoyed government backing. To gain access to the deal, which was virtually guaranteed to be profitable, Mr Cohen paid “a bogus $400,000 ‘deal fee’ to an entity controlled by” the leader’s son, the complaint says.
In early 2007, as Mr Cohen began meeting Libyan officials, he emailed a co-worker about the outlook in the North African country. The “[m]eetings are amazing. They [the LIA] have 77 billion, half in cash, and no idea who to give it to . . . I haven’t been this excited in a while,” Mr Cohen wrote in an email quoted in the complaint.
The complaint details six transactions that enforcement officials label “corrupt,” including deals involving mining assets in South Africa and the DRC. The SEC also accuses the two men of skirting Och-Ziff’s internal controls so that their bribes would be booked as legitimate business expenses.
Allegations of corruption in Africa have dogged Och-Ziff, one of the world’s largest hedge fund managers, since it disclosed it was under investigation in 2014. Och-Ziff’s assets under management fell to $33.5bn at the end of last year from a peak of $47.5bn in 2014.
Och-Ziff’s willingness to ink deals in Africa distinguished it from more conservative rivals. But prosecutors said the fund violated anti-corruption laws in the bargain. At the time of the September settlement, Mr Och described the conduct as “inconsistent with our core values and not representative of our hundreds of employees worldwide”.