Sculptor Agrees to Pay $136 Million to Bribery Scheme Victims
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.
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.
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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