Recent SEC and DOJ Settlements With Och-Ziff and Two Executives Underscore FCPA Compliance Risks to Private Fund Managers

The SEC and DOJ recently announced a settlement with Och-Ziff Capital Management (Och-Ziff) and two of its employees for more than $400 million. The settlement papers suggest that the firm’s compliance policies and procedures were not sufficiently robust to prevent violations of the Foreign Corrupt Practices Act (FCPA) – both in terms of procuring investors and when making private equity investments. Events leading to the settlements include allegations that employees of the company worked with intermediaries with questionable backgrounds and known ties to government officials. Once investments were made, it does not appear that checks and balances were in place to ensure that investor funds were spent appropriately. According to a team of attorneys from MoloLamken, including partners Justin Shur and Jessica Ortiz as well as associate Eric Nitz, the settlement is a “significant development” in both the FCPA and hedge fund worlds. “For a number of years, the DOJ and the SEC have indicated that their FCPA enforcement efforts are focused on private equity and hedge funds,” they said, “but the Och-Ziff settlement is the first major move in that direction. And it’s a significant one: the case represents one of the largest FCPA settlements in history against one of the world’s largest hedge funds.” A companion article in our next issue will distill further compliance takeaways from the case. See “FCPA Compliance Strategies for Hedge Fund and Private Equity Fund Managers” (Jun. 13, 2014); as well as our two-part series on FCPA risks and concerns for private fund managers: Part One (May 28, 2015); and Part Two (Jun. 11, 2015).

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