(Bloomberg) -- An investor group demanding as much as $600 million in restitution from Och-Ziff Capital Management Group LLC over lost mining rights asked a federal judge to hold a hearing to allow them to challenge the hedge fund’s deal to settle U.S. charges.
Lawyers for 50 investors in Africo Resources Ltd. said Thursday they met with federal prosecutors and provided additional evidence to support their claims they were victims of the hedge fund’s bribery scheme to acquire mining assets in several African countries. The bribery scheme cost them control of rights to the Kalukundi copper and cobalt mine in the Democratic Republic of Congo, according to Africo.
We "respectfully request that the court set a status conference to ensure this proceeding moves forward so that the victims’ rights may be fully and expeditiously vindicated," said Morris Fodeman, a lawyer for Africo investors.
U.S. District Judge Nicholas Garaufis in Brooklyn, New York, was to sentence the unit, OZ Africa Management GP, but agreed earlier this year to hear the investors’ request to be considered victims of the fraud scheme. He hasn’t ruled on the request for a hearing.
Och-Ziff, which has $33 billion under management, has been working to put the yearslong corruption saga behind it, which included a guilty plea by its unit in 2016 and a three-year deferred prosecution agreement.
The former Africo shareholders say the company once owned the exclusive mining rights to Kalukundi when Israeli mining tycoon Dan Gertler, one of Och-Ziff’s partners, orchestrated a plan to illegally take over the property in 2008. The U.S. only referred to an “infamous Israeli businessman” in court documents, but Africo has identified the partner as Gertler.
At a hearing in April, Assistant U.S. Attorney David Pitluck said Africo wasn’t entitled to restitution because the government believed there were two separate conspiracies and that the Och-Ziff unit wasn’t involved in the earlier scheme when the mining rights were originally lost.
But Fodeman said that conclusion was based on the government’s "flawed understanding" of what occurred. While the U.S. argues one of Africo’s former employees "took" the mining interests away from it, the investors say the Och-Ziff unit conspired with a Congolese company to bribe DRC officials and judges to resolve a legal dispute and gain control of the mining interests. Prosecutors said Gertler bribed DRC officials to ensure Africo didn’t win the case.
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"It could not be clearer that -- but for Och-Ziff Africa’s and its co-conspirators’ crime -- the Africo Owners would have been reconfirmed as the rightful owners of the Kalukundi mining rights through the DRC legal process," Fodeman said.
While Pitluck told Garaufis in April that it’s difficult to calculate the financial harm which Africo investors suffered as a result of the fraud, Fodeman said his clients were entitled to restitution of about $600 million, their share of the mine’s current value.
As part of the 2016 accord, OZ Africa Management pleaded guilty to conspiracy to bribe DRC officials. The fund paid $213 million to end the criminal probe and $199 million to the U.S. Securities and Exchange Commission to settle civil claims.
“The matter has been without merit throughout and this remains an attempt to receive an undue payment,” said Jonathan Gasthalter, a spokesman for Och-Ziff.
Africo shareholders have said while the U.S. initially recognized them as victims of the fund’s fraud who were entitled to restitution, that changed after Och-Ziff started a lobbying campaign. Och-Ziff also threatened to pull out of the deferred-prosecution deal if it has to pay restitution, Fodeman said.
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