Och-Ziff Capital Management Group

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Och-Ziff Capital Management Group is a hedge fund and asset management company. The firm was founded by current Chairman and CEO Daniel Och in 1994.[1] As of 2015 the company oversees more than $46 billion.[2]

History

The business was founded in 1994 by Daniel Och with the financial backing of the Ziff family, founders of Ziff Davis Media.[3] The latter company was founded by William Bernard Ziff, Sr a prominent figure in Revisionist Zionism in the 1930s.[4]

Och-Ziff Capital Management Group Controversies

Zimbabwe

In the run up to the 2008 second presidential runoff election in Zimbabwe the government of Robert Mugabe unleashed a wave of repression against the Zimbabwean opposition. According to US State Department estimates there were 289 deaths and more than 22,000 injured casualties.[5] As the attacks progressed a Wall Street consortium provided the Zimbabwean government with $100 million dollars to secure platinum mining rights in the country. Firms involved in the consortium included BlackRock, GLG Partners, Credit Suisse and the Och-Ziff Capital Management Group.[5]

The Mugabe government had taken control of the platinum claims in the Zimbabwean Great Dyke which had formerly been held by Anglo American Platinum. The rights were bought by a mining company - the Central African Mining and Exploration Company (Camec) - which was bought out in 2009 by the Eurasian Natural Resources Corporation. Och-Ziff eventually provided 75 percent of the funds Camec raised to secure the mining rights, making Och-Ziff the fourth largest shareholder in the company. Och-Ziff offered shares in Camec on April 7, 2008:[5]

Four days later, Camec announced it was using the money it raised to purchase a joint venture with the Zimbabwe Mining Development Corp., or ZMDC, Mugabe’s state-owned mining company. The joint venture owned the platinum stakes on the Great Dyke that had been taken back just a few weeks earlier from Anglo American. The price included $5 million in cash; Camec issued shares to partners whose identities were shielded by a shell company based in the British Virgin Islands; and $100 million to Mugabe’s government. Camec said the $100 million was a cash loan “to comply with its contractual obligations to the government of Zimbabwe” for the platinum claims. It said the money would be repaid out of ZMDC’s share of future platinum earnings. Camec’s balance sheets for the period make clear that funding for the platinum rights came from the private transactions involving Och-Ziff.[5]

In October 2008 the US Ambassador in Zimbabwe received information claiming that a Camec shareholder was purchasing vehicles off the books for the Mugabe government:

[US Ambassador] McGee’s staff pursued a tip that a Camec shareholder, Muller Conrad “Billy” Rautenbach, was helping the government buy vehicles off the books. A Zimbabwean businessman named Raymond Tendai Chamba, who ran the local office of a Namibian export-import firm, alleges that Rautenbach and Mugabe’s central banker, Gideon Gono, placed orders for 642 vehicles with his company. They were mostly Isuzu (7202:JP) pickups, Toyota (TM) SUVs, and minivans. Chamba says the orders began coming in during the election period, and he was paid $65,000 in cash per truck. He claims Rautenbach paid mostly in U.S. dollars.[5]

The election never took place, with the opposition leader withdrawing in the hope attacks against the opposition would end.[5]

Och-Ziff's European and African investments at the time were overseen by Michael Cohen, reportedly a protégé of Daniel Och's. In 2013 Cohen left the company:

On March 18, 2013, Och-Ziff announced Cohen’s departure from the firm, without explanation. Before Cohen left, he bought a $22 million English country estate outside London. Called Ewhurst Park, the more than 900-acre spread includes a sprawling main house, cottages, a church, a large lake with ducks, a boathouse, bridges, wooded areas, fountains, and formal gardens. Reached on his cell phone, Cohen declined to comment.[5]

In 2014, Och-Ziff warned its shareholders that the Department of Justice and SEC were investigating the firm regarding, amongst other things, its investment activities in a number of companies in Africa.[5]

Libya

In March 2014 Och-Ziff Capital Management Group announced that the hedge fund was under investigation by US regulators, investigating whether or not the company broke bribery laws by accepting an investment from the $65 billion Libyan Investment Authority (LIA) sovereign wealth fund prior to the overthrow of the Qaddafi regime:

Och-Ziff received subpoenas starting in 2011 from the U.S. Securities and Exchange Commission as part of a probe into possible violations of the Foreign Corrupt Practices Act, the New York-based company said in a regulatory filing yesterday. The Justice Department has requested information from Och-Ziff as part of the same investigation, according to the filing. Its shares fell the most in more than a month. The sovereign fund referenced by Och-Ziff in its filing is the Libyan Investment Authority, according to a person with knowledge of the matter who asked not to be identified because they weren’t authorized to speak publicly... The SEC and Justice Department are also examining investments that Och-Ziff made “directly and indirectly” in a number of African companies, the filing said. Och-Ziff said it’s not able to determine how the investigation will be resolved.[6] [7]

The investigation was reportedly examining payments made by a UK-based middleman between Och-Ziff and the LIA named Mohamad Ali-Ajami.[8]

Greece

In January 2012 The Independent reported that Och-Ziff was one of a number of hedge funds that had bought Greek bonds at rock bottom prices were attempting to block a write-down of Greek debt in order to ensure making significant profits on their investments:

these funds are believed to have purchased insurance policies on their holdings of Greek bonds, known as Credit Default Swaps (CDS). If Athens fails to pay its maturing debts in March, that would trigger large CDS payouts to these funds from the large financial firms that sold them the insurance.[9]

Guinea

A partner company of Och-Ziif, Palladino Holdings loaned $25 million to the Guinean government ostensibly for the purpose of a new state mine. However it has been suggested that the funds were given as 'a quid pro quo in return for [Guinean President] Condé campaign support':

Palladino’s contracts with Guinea were signed in the months shortly after Condé was elected as president in November 2010. This followed two turbulent years of military rule.
Guineans went to the polls for a first round of voting in June 2010. A second round of voting was delayed for three months until November, and Condé took office on December 21.
A first order of business for Condé’s government was an assessment of how the country’s mineral assets – vast bauxite reserves, high-grade iron ore, gold and diamonds – could be better managed as well as used to raise much-needed state funding. According to Palladino, it was invited in early 2011 to consult...

Palladino Holdings were granted extremely favourable terms regarding mining rights in the country:

Palladino was to be granted as much as a 49% of the equity stake and voting rights in the state mining company.
With no reference to a licence process open to all contenders, Palladino could choose to negotiate to acquire “minority or majority” stakes in any state-linked mining asset.
Guinea could not sell any state interest in a mining asset without first offering the option to Palladino.
Should Palladino wish to acquire a stake in a mining asset, it was granted the privilege of a six-month negotiating period. If a deal could not be struck, Guinea would be allowed to negotiate with a third party – but Palladino would retain first right of refusal on any deal less favourable to Guinea than the initial offer...
On the basis of these proposed “reasons of common interest” between Palladino and Guinea, the company loaned the country $25-million to finance the establishment of the state mining company. But should Guinea default on the loan, Palladino could take up to a 30% stake in an unspecified subsidiary of the state mining company.[10]

Subsequently the World Bank opened an investigation into the country’s mining sector.[11]

Notes

  1. ↑ bloomberg.com Och-Ziff Capital Managemen-A (OZM:New York). Accessed 17 June 2015.
  2. ↑ forbes.com The Highest-Earning Hedge Fund Managers & Traders. Accessed 17 June 2015.
  3. ↑ forbes.com #318 Dirk Ziff. Accessed 19 June 2015.
  4. ↑ Medoff, Rafael, (2001), Militant Zionism in America: The Rise and Impact of the Jabotinsky Movement, University of Alabama Press
  5. ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Cam Simpson and Jesse Westbrook The Hedge Fund and the Despot Bloomberg Business, 21 August 2014, accessed 17 June 2014
  6. ↑ Jesse Westbrook, 'Och-Ziff Falls After Disclosing Sovereign-Related Probe', Bloomberg Business, 20 March 2014, accessed 18 June 2015
  7. ↑ Richard L. Cassin, 'HEDGE FUND MANAGER OCH-ZIFF DISCLOSES FCPA PROBE', The FCPA Blog, 20 March 2014, accessed 18 June 2015
  8. ↑ Jim Armitage, 'London firms watch as Libya bribery trial begins', The Independent, 7 March 2015, accessed 18 June 2015
  9. ↑ Ben Chu, 'Greek rescue blocked by hedge fund greed', The Independent, 18 January 2012, accessed 18 June 2015
  10. ↑ Craig McKune, Stefaans Brummer, James Wood 'Tokyo-linked company in Guinea row', Mail and Guardian, 29 June 2012, accessed 18 June 2015
  11. ↑ Craig McKune, Stefaans Brummer, James Wood 'Tokyo-linked company in Guinea row', Mail and Guardian, 29 June 2012, accessed 18 June 2015
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