U.S. authorities are investigating whether Och-Ziff Capital Management GroupOZM-6.63% LLC knew that part of a $150 million investment in a small African miner would wind up in the hands of Zimbabwe President Robert Mugabe’s government, according to people familiar with the probe.
Och-Ziff last year disclosed that a broader Justice Department and Securities and Exchange Commission investigation is examining the $47 billion New York hedge fund’s business in Africa under the Foreign Corrupt Practices Act. The act bars firms doing business in the U.S. from giving money or items of value to foreign officials for business, either directly or through intermediaries.
The publicly traded hedge-fund firm is in talks to settle the probe into its ties to a network of investors and deal makers that it worked with on business from Libya to South Africa, according to people familiar with the investigation. Och-Ziff and others have poured hundreds of millions of dollars into mining operations in the past decade as commodities prices soared.
In Zimbabwe, U.S. authorities are examining Och-Ziff’s connection to a $100 million payment to Mr. Mugabe’s government in early 2008, the people said. The investigation into Och-Ziff’s ties to the payment, which was made through the African mining company it invested in, Central African Mining & Exploration Co., or Camec, hasn’t been previously disclosed. Camec at the time described the payment as a loan.
Och-Ziff has denied that it knew some of the money would end up with the Zimbabwe government. Human-rights groups said the funds were used to carry out a violent crackdown on the opposition during a tough election Mr. Mugabe ultimately won in 2008.
U.S. investigators are scrutinizing a March 2008 trip to Zimbabwe taken by Och-Ziff’s Africa director at the time, Vanja Baros, according to people familiar with the investigation. The people said Mr. Baros met several people involved in channeling the money to the Mugabe government, including Billy Rautenbach, a Zimbabwean businessman with close ties to the dictator.
Mr. Baros told Och-Ziff’s European investing chief, Michael L. Cohen, of the trip before he left for Zimbabwe, according to people familiar with the matter. The activities of Mr. Cohen, once among Och-Ziff’s highest-paid executives, are part of the broader federal investigation, The Wall Street Journal has reported.
About three weeks after Mr. Baros’s trip, in early April 2008, Och-Ziff made its investment in Camec, U.K. regulatory filings show. Days later, on April 11, Camec said in a statement about the deal that it purchased a company Mr. Rautenbach controlled, Lefever Finance Ltd., and its stake in Zimbabwe platinum mining operations for $5 million and 215 million Camec shares. As part of the deal, Camec said it would make a $100 million payment to Lefever, which in turn lent the money to the Zimbabwe government to meet pre-existing obligations.
The U.S. government’s ability to bring a case under the foreign bribery law could turn on whether it finds evidence to prove Och-Ziff had influence over how its investment was used and whether its employees knew, or believed it was highly likely, that the money could be used to pay a foreign official, legal observers said.
Mr. Baros, who left Och-Ziff in 2013, declined to comment. Mr. Cohen also left the fund in 2013.
Och-Ziff, which first disclosed the now four-year-old probe to investors last year after the Journal reported on it, said in a May 5, 2015, SEC filing that it believed it “reasonably likely” the inquiry would lead to an enforcement action. “We’re hopeful that the investigation and the effect of legal expenses will be over by year-end,” the firm’s chairman, Daniel Och, said in an earnings call that day.
Representatives for the Justice Department, Mr. Rautenbach and the Zimbabwe government didn’t respond to requests for comment. The SEC declined to comment. Camec was bought in 2009 by U.K.-Kazakhstan miner Eurasian Natural Resources Corp., which didn’t respond to a request for comment.
According to people familiar with the probe, prosecutors’ and regulators’ broader investigation includes Och-Ziff’s dealings with Israeli billionaire Dan Gertler, who has been accused by, among others, mining-transparency advocates such as Global Witness of getting sweetheart mining deals through his close ties to Joseph Kabila, president of the Democratic Republic of the Congo. The probe is looking into whether money from Och-Ziff investments into Mr. Gertler’s entities reached anyone in the Congolese government and whether Och-Ziff was aware of such deals, said the people. Mr. Gertler hasn’t been accused of any wrongdoing.
The probe also is looking at the hedge fund’s dealings with a London-based Lebanese businessman, Mohamad Ali Ajami, who had ties to the regime of former Libyan dictator Col. Moammar Gadhafi, the Journal has reported.
A spokesman for Fleurette Group, Mr. Gertler’s holding company, said it “disputes any notion it has received preferential deals” in the Congo. “We have invested billions into assets that now pay hundreds of millions in taxes” to the Congolese government, he said. Mr. Ajami didn’t respond to a request for comment.
At the time of Mr. Baros’s visit to Zimbabwe in 2008, Mr. Gertler, one of Israel’s richest men, owned 40% of Camec, which was looking to raise funds to invest in platinum assets in Zimbabwe. Mr. Gertler’s spokesman said the company had no connection to Camec’s Zimbabwe dealings.
Camec turned to Mr. Rautenbach, whose ties to Mr. Mugabe stretched back to the 1990s. Mr. Rautenbach had built a small empire of businesses in Zimbabwe and other places in Africa ranging from trucking to manufacturing to mining and for years had extensive dealings with Camec in the Congo and elsewhere.
Mr. Rautenbach at the time of Camec’s move faced an arrest warrant in South Africa for alleged fraud, corruption and theft. In 2009, he pleaded guilty on behalf of a company he controlled to fraud charges and paid a fine of about $5 million.
A November 2001 report by a United Nations panel on natural-resources exploitation in the Congo called Mr. Rautenbach “a man with no mining experience but with close ties to the ruling ZANU-PF party in Zimbabwe.” The panel said Mr. Rautenbach was appointed in 1998 by Mr. Kabila as managing director of a Congolese state-controlled mining company at Mr. Mugabe’s request.
In late 2008, the U.S. Treasury Department put Mr. Rautenbach on a list of what it called Mr. Mugabe’s “cronies” and said he “provided logistical support for large-scale mining projects in Zimbabwe that benefit a small number of corrupt senior officials.” The Treasury removed Mr. Rautenbach from the list in 2014; the agency said that after a review, Mr. Rautenbach no longer warranted inclusion.
Mr. Rautenbach met the Och-Ziff Africa director, Mr. Baros, in a mid-March 2008 gathering in Zimbabwe, along with a Camec executive and others, people familiar with the visit said. The trip was organized by Credit Suisse Group AGCS-0.84% analysts who were optimistic about the company, these people said. The group visited a trucking operation used to service Camec’s Congolese mining projects and had dinner, the people said. They also visited the Congo and Mozambique, the people said.
When Och-Ziff eventually made the equity investment in Camec, it wasn’t alone. BlackRock Inc.,BLK-0.72% Credit Suisse and other firms purchased $50 million of shares, regulatory filings show. BlackRock and Credit Suisse haven’t been accused of any wrongdoing. The companies declined to comment.
Och-Ziff’s connection to the loan—disclosed in 2012 in the South African press—has raised concerns from at least one big investor.
In a September 2013 letter to the California Public Employees’ Retirement System, the biggest pension fund in the U.S. by assets known as Calpers and a onetime Och-Ziff investor that had questioned it about the Zimbabwe loan, the hedge-fund firm said it was a “passive shareholder of Camec” and that it “does not believe that any employee knew that Camec intended to provide funds raised from the offering to the regime of Robert Mugabe.”
A spokesman for Calpers, which last year shed its investments in hedge funds, including Och-Ziff, declined to comment.
– The Wall Street Journal
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