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March 19, 2014 12:07 am
Och-Ziff, the hedge fund group, warned that it could face a hit to its financial results from a Department of Justice investigation into alleged corruption in Libya before the fall of Muammer Gaddafi.
The company revealed in a regulatory filing on Tuesday that the DoJ and the Securities and Exchange Commission were examining its relationship with the Libyan Investment Authority, the country’s sovereign wealth fund, and its investments in companies doing business in Libya.
The investigations began in 2011 but were not judged serious enough to disclose until recently.
“Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the DoJ in connection with an investigation involving the Foreign Corrupt Practices Act (FCPA) and related laws,” the company said in its annual report.
“The investigation concerns an investment by a foreign sovereign wealth fund in some of our funds in 2007 and investments by some of our funds, both directly and indirectly, in a number of companies in Africa. At this time, we are unable to determine how the investigation will be resolved and what impact, if any, it will have.”
The SEC has been looking into whether US financial firms made inappropriate payments to officials for access to the LIA, while the DoJ has joined the widening investigation to examine the use of “placement agents” to conduct deals in the country.
Federal agencies are also looking at Blackstone and Goldman Sachs, people familiar with the matter said. Blackstone did not ultimately take an investment from the LIA.
Goldman said in its most recent regulatory filing that it is co-operating with regulatory investigations and reviews including its compliance with the US FCPA. On Tuesday Goldman declined to comment.
Och-Ziff was an investor in a joint venture to construct a luxury hotel in Tripoli, which has come under scrutiny, according to people familiar with the investigation.
An Och-Ziff spokesman declined to elaborate on the annual report disclosures.
The US ended most of its sanctions on Libya in 2004, after Gaddafi gave up chemical weapons, and western financial firms raced to secure business in the country.
The FCPA outlaws the payment of bribes by US companies anywhere in the world.
Scrutiny over global financial dealings with former Libyan government officials accelerated after the ousting and death of Gaddafi in 2011.
Separately, in January, in a disputed claim, Libya’s sovereign wealth fund took formal legal action in London against Goldman over allegations that the investment bank “exploited” the fund’s limited financial experience, forcing it into risky and ultimately lossmaking investments.
The claim, made in legal papers submitted by the LIA, rests on disputed equity derivatives trades amounting to in excess of $1bn.
“We think the claims are without merit, and will defend them vigorously,” a spokesperson for Goldman Sachs said at the time.
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