Wednesday, October 28, 2020

Sculptor to pay ex-investors $136M in Congolese mine bribery scheme

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Sculptor Capital Management Inc. has agreed to pay $136 million to a group of former investors in a Congolese mine who were found by a court to be victims of a decade-old bribery scheme involving the hedge fund.

The proposed settlement would resolve a claim that has hung over Sculptor since shortly after it agreed to settle U.S. criminal charges related to the bribery scheme in 2016. The claim has prevented the hedge fund from finalizing part of that agreement.

Bribery victims can be difficult to identify, and they rarely come forward to ask for restitution in cases such as the one involving Sculptor. The $136 million settlement is believed to be the first time a company has compensated victims of bribery under the U.S. Foreign Corrupt Practices Act, according to FCPA lawyers. The FCPA is an antibribery law that prohibits companies from paying bribes to foreign government officials.

News of a possible settlement emerged this month, when investors informed a judge overseeing the case of a tentative deal. Sculptor, which was previously called Och-Ziff Capital Management, disclosed the value of the proposed agreement in a securities filing Friday.

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A spokesman for Sculptor didn’t return a request for comment. A spokesman for the U.S. Department of Justice declined to comment on the proposed settlement.

The deal still needs approval from U.S. District Judge Nicholas Garaufis, who previously ruled that the former investors qualified as victims under the Mandatory Restitution Act of 1996.

Lawyers for Sculptor also have made it clear that the settlement is contingent upon the restitution amount being final. If other victims come forward, the settlement could be called off, they have said.

The investors have identified themselves as former equity holders of the Canadian mining company Africo Resources Ltd., which held shares in a copper mine that played a central role in the bribery scheme. The mine is in the Democratic Republic of the Congo.

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Africo lost control of the mine after Israeli businessman Dan Gertler paid millions of dollars in bribes using funds from an investment by Och-Ziff to influence a legal dispute over the mine’s ownership, according to federal prosecutors. A spokesman for Mr. Gertler said Monday that the businessman denies all accusations of wrongdoing in the Democratic Republic of the Congo.

The Justice Department initially opposed the Africo investors’ restitution claim but reversed course after Judge Garaufis’s ruling, saying Sculptor should pay at least $150 million in compensation.

Exactly how much Sculptor should have to pay had been the subject of litigation in recent months. The hedge fund has argued that it should pay much less than what the government and the Africo investors proposed.

The fund last year told investors it was setting aside a $19.1 million legal provision related to the restitution claim.

Companies regularly pay hefty sums to settle allegations of FCPA violations. The success of the Africo investors’ claim increases the likelihood that others will seek restitution in connection with such settlements, said Ephraim Wernick, a partner at the law firm Vinson & Elkins LLP and a former federal prosecutor.

“In this case it was a group of investors as a class of victims,” Mr. Wernick said. “I think you’ll see other classes of victims trying to get recognized and trying to get restitution.”

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