Och-Ziff Stock Price Plummets on Possible Guilty Plea in Settlement

Apr 12 2016 | 10:59pm ET

The shares of Och-Ziff Capital Management, the largest publicy traded U.S. hedge fund company, fell to its lowest level since its 2007 IPO on news that the company may have to plead guilty to criminal charges of bribery in order to settle a long-standing probe of the hedge fund manager. 

The U.S. Department of Justice has been investigating allegations that Och Ziff paid bribes to secure international business, including an investment from Libya’s sovereign wealth fund, and whether loans it made eventually ended up as payments to officials in the government in the Democratic Republic of Congo. Michael Cohen, the company’s former head of European investing and the executive responsible for investments in Africa, resigned in March 2013.

In addition to the guilty plea being sought by the DOJ, the U.S. SEC is asking for civil penalties of between $100 million and $400 million, according to Bloomberg citing unidentified sources. The U.S. Foreign Corrupt Practices Act bars the payment of money or provision of gifts by U.S. companies to foreign officials in exchange for business, directly or otherwise. 

Och-Ziff has said the allegedly illegal behavior was not widely known within the firm and has asked for a deferred prosecution agreement instead of a guilty plea. U.S. officials, meanwhile, are pushing for a guilty plea as part of any settlement, according to Bloomberg. 

Concerns about the probe and its impact on assets under management, as well as investment performance, have weighed heavily on Och-Ziff’s stock, which closed at $3.30 on Tuesday after being as low as $2.90 during the session. It is now down more than 47% since January 1 alone and reported its first-ever quarterly loss earlier this year.

Och-Ziff was founded in 1994 and brought public at $32 per share in late 2007 by former Goldman Sachs trader Daniel Och in 2007. Assets under management have fallen from around $47 billion at the end of 2014 to approximately $42 billion on April 1. 

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