Och-Ziff Jumps as Hedge Fund May Be Spared in Bribery Probe

  • Prosecutors said to discuss guilty plea of overseas unit
  • Och-Ziff itself may avoid conviction, people familiar say

Shares of Och-Ziff Capital Management Group LLC, which is under investigation by U.S. authorities for bribery, rose on news that the hedge fund firm’s main business may avoid conviction in the probe.

The New York investment firm, which is led by Daniel Och, has been in the crosshairs of investigators for at least five years over whether it knowingly paid bribes to government officials in Africa. Prosecutors are discussing an arrangement with the money manager that would have an overseas unit plead guilty, while still requiring the holding company to enter a deferred-prosecution agreement, people with knowledge of the matter told Bloomberg Tuesday.

Och-Ziff rose as much as 8.1 percent, the most in two weeks, and was up 6.5 percent to $3.94 as of the end of trading in New York.

Och-Ziff has suffered a wave of redemptions as the probe comes to a head. The legal woes, decline in assets, and the mediocre performance in the firm’s main multistrategy hedge fund have taken a toll on the company’s stock, which has fallen about 64 percent in the past year.

“Of the best, base, and worst case outcomes for the investigation, we view a deferred prosecution agreement as a best case outcome” because charges are dismissed after a period of time if a company remains compliant, Amy DeBone, an analyst at Compass Point Research & Trading, wrote in a report Wednesday.

Och-Ziff said earlier this month that it earmarked $414.3 million to resolve the investigation and is in talks to raise capital from partners to help cover the cost. Chief Financial Officer Joel Frank said on a conference call at the time that talks with the government are in advanced stages and that he doesn’t expect the final settlement amount to exceed the reserve.

“The biggest issue is the reputational risk to OZ fund investors, especially the large state pensions,” John Hunt, a partner at Sullivan & Worcester who specializes in compliance issues for money managers, said in an e-mail. “I do not think that this will scare institutional investors away from funds that invest in Africa, but it may cause them to do more due diligence on asset managers’ policies for complying with anti-bribery laws.”

— With assistance by Franz Wild, and Chris Dolmetsch

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