Source: NGO accuses Britain of being bribes hub in Africa mining deals including Zimbabwe | The Financial Gazette January 10, 2017
AN international organisation that fights corporate misconduct has raised concern over the failure by United Kingdom authorities to stop corrupt practices in deals between a leading Wall Street hedge fund and top officials in Zimbabwe and the Democratic Republic of Congo (DRC).
In a report by NGO Rights and Accountability in Development (RAID), the US authorities found that the hedge fund used third parties and a chain of subsidiaries to pay bribes to high-level officials in Africa, and the alleged corrupt transactions were carried out via the firm’s London office.
The report titled ‘Bribery in its purest form’: Och-Ziff, asset laundering and the London connection sets out the repeated failure of the UK regulatory authorities over a 10-year period – despite warnings from UN Experts, due diligence studies and compliance watch lists – to take action to prevent assets acquired through corrupt means being traded on the London markets. The key question addressed in the report is that: having failed to heed repeated calls for action, can the UK continue to shelter those who have been involved in corrupt deals, or ostensibly breached sanctions or flouted market rules, without causing lasting damage to its reputation?
In September 2016, the US Department of Justice (DoJ) charged one of the world’s largest hedge funds, Och-Ziff Capital Management Group (Och-Ziff), which has $40bn in assets under management “with conspiracy to violate the anti-bribery provisions of the (US) Foreign Corrupt Practices Act (FCPA)”, regarding transactions in the DRC and Zimbabwe
The hedge fund has been under investigation by the DoJ and the US Securities and Exchange Commission (SEC) since 2011. One of Och-Ziff’s subsidiaries, OZ Africa Management, on 29 September 2016 pleaded guilty and agreed to pay out $412m; the largest ever criminal and civil settlement for a Wall Street-listed firm.
According to the report by NGO Rights and Accountability in Development (RAID), the US authorities found that the hedge fund used third parties and a chain of subsidiaries to pay bribes to high-level officials in Africa, and the alleged corrupt transactions were carried out via the firm’s London office.
Multi-million alleged DRC corruption scheme
The hedge fund, the report alleges, had joint-control of African Global Capital (AGC), which it used to find lucrative business opportunities on the continent.
According to DoJ documents, one of AGC’s partners in Congo, is referred to as “an Israeli businessman” with “significant interests in the diamond and mineral mining industries in the DRC”. While some of the individuals involved are named in the official documents, others are not.
The DoJ and SEC documents cite a Bloomberg article in which a spokesman for Israeli billionaire Dan Gertler, who heads the Fleurette Group, is reported as saying”The Fleurette Group and Dan Gertler strongly deny the allegations announced today, which are motivated by a hedge fund trying to put behind it problems sparked by people that have nothing to do with Fleurette.”
According to the deferred prosecution agreement (DPA) entered by Occ-Ziff with the US prosecution to settle the allegations, the report alleges that the fund’s employees “entered into agreements with Gertler” as its “DRC partner to purchase shares in [DRC] mining companies under his control, aware that payments would be made to bribe high-ranking Congolese officials, who would bring pressure to bear on rival companies, forcing them to relinquish their assets”.
The DPA documents further note that when misuse of company funds emerged, Och-Ziff “conducted no review […] to confirm or rebut the allegations and thereafter advanced more than $200m to DRC partner for additional transactions”.
The DoJ documents state this practice took place over a “10-year period”, during which “Och-Ziff’s DRC partner, together with others, paid more than $100m in bribes to DRC officials”. The DoJ described the corrupt practices of Och-Ziff as “bribery in its purest form.
‘Suspicious Payments’, sanctions and Zimbabwe
According to the report, both the DOJ and SEC are concerned with violations of the FCPA and not the enforcement of sanctions. This notwithstanding, both authorities refer, under the headings of ‘Suspicious Payments’ or ‘Allegations of Serious Misconduct’, to a transaction in Zimbabwe to buy platinum assets from a state entity and the Central African Mining and Exploration Company (CAMEC) Zimbabwean shareholder (Billy Rautenbach), to the diversion of an Och-Ziff loan to a Zimbabwean political party and to the use of Och-Ziff’s investment to pay for an arms shipment from China. The platinum mine has since changed shareholders and is now being developed by the Russians
In the 2008 election in Zimbabwe, ZANU-PF’s Robert Mugabe retained the presidency after a campaign against Movement for Democratic Change (MDC) supporters. The campaign was financed by money originating with Och-Ziff and channelled to the Zimbabwe government via a loan as part of CAMEC’s lucrative platinum deal.
According to the report the $100 million loan changed Zimbabwe’s future by thwarting progress towards democracy. Mugabe and key allies in ZANU-PF and the military were all on the EU and US sanctions list at the time of the loan. The SEC Order accords with RAID’s 2013 account of the platinum deal. Furthermore, the head of Och-Ziff’s London office had been warned by his colleague (Baros) that the Och-Ziff loan may have been used to pay for a shipment of arms from China. Yet neither Och-Ziff employee notified Och-Ziff’s legal and compliance department. Despite the existence of US sanctions against Zimbabwe, Och-Ziff held onto its CAMEC shares until November 2009.
RAID has already raised the matter of the Zimbabwean platinum deal and sanctions with both HM Treasury in the UK and the Office of Foreign Assets Control (OFAC) in the US. Statements made by the SEC and DOJ in the Och-Ziff case corroborate that RAID was right to have flagged these concerns. RAID’s current report highlights inconsistencies over when and what Och-Ziff knew about the Zimbabwean platinum deal and calls upon OFAC to investigate. A key question is whether the UK authorities, far from preventing the platinum mine purchase or the later sale of shares controlled by sanctions targets, actually approved or licenced the transactions.
RAID has been unsuccessful in its attempts to find out, through a Freedom of Information Act (FOIA) request, what the UK government knew or did about the Zimbabwean platinum deal. The report says the UK Treasury is refusing to confirm or deny whether or not it gave tacit approval for the transaction – it is apparent that CAMEC has never been charged with violating sanctions – or whether it licensed the sale of Rautenbach’s shares and allowed him access to the proceeds (again, there is a widespread perception that such licences were forthcoming). – http://www.raid-uk.org
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