A Senior Hedge Fund Manager Admits to Lying to Prosecutors in New York

(Bloomberg) -- Michael L. Cohen, the former European head of Och-Ziff Capital Management Group, pleaded guilty to a single count of lying to U.S. authorities a year after they accused him of cheating a client out of millions of dollars.

In a sign the U.S. case against Cohen has largely unraveled, prosecutors agreed to dismiss the remaining nine counts, including several fraud charges.

The case against Cohen, an American living in London, grew out of a sprawling scandal that has proven costly for Och-Ziff, one of Wall Street’s most prominent hedge-fund management firms. In September 2016, it paid $400 million in fines for bribing officials across Africa with more than $100 million. Founder Dan Och paid a $2 million penalty, as clients withdrew assets from the firm.

In charges unsealed in January 2018, Cohen was accused of enriching himself at the expense of a large charity, which prosecutors didn’t identify. Two people familiar with the matter said it was Wellcome Trust, an organization that supports research in science, health and other areas. Cohen brokered a sale of shares in an African mining company that were owned by a business associate of his to the charity, they claimed.

Cohen lent the associate $18 million to buy a luxury yacht and and got $4 million of the proceeds from the sale of the shares, prosecutors said. He also didn’t tell the charity he had a personal interest in the mining company and owned some of the shares involved in the sale, according to the indictment.

Cohen’s plea pertains to lying to the U.S. when questioned about a letter describing this transaction. While the original fraud and conspiracy charges could have sent Cohen to prison for years. Now, it’s unclear if he will serve any time.

Prosecutors believe Cohen faces 10 to 16 months behind bars under federal sentencing guidelines. The defense said his sentencing range is zero to six months, according to a person familiar with the matter who declined to speak publicly about confidential plea talks. Sentencing by U.S. District Judge Nicholas Garaufis was set for Sept. 22.

On Wednesday, Cohen admitted that he lied to prosecutors and agents of the Federal Bureau of Investigation. During a May 30, 2013, interview, agents asked Cohen if the letter was backdated in an effort to hide his interest in a proposed investment in the African mining company.

“I stated, in substance, that the date on the letter was accurate and that I had received it in 2010,” Cohen said. “These statements were false. In fact, I knew that the letter had been written in 2012, not in October 2010 as the date indicated. I also knew that I had received the letter in 2012, not 2010.” The letter had been written “to memorialize an oral agreement we had in 2010,” he said, adding later that he had lied “with the intent to mislead” investigators.

Cohen told the court that two days after the session with investigators, he had directed his lawyer to correct his misstatements about the letter. His lawyers, Ron White and Paul Schoeman, said in a statement that their client “has acknowledged responsibility for his actions and looks forward to putting the matter behind him."

Cohen was a rising star at Och-Ziff and led the firm’s European expansion while he was still in his 20’s. He bought a 900-acre estate in the English countryside, was an avid hunter and sought out new opportunities in African resources. He’s now in his mid-40s.

Cohen and a Gabonese fixer used by an Och-Ziff joint venture are the only executives to be criminally charged in the Och-Ziff investigation. He was indicted for conspiracy to commit investment-adviser fraud and conspiring to commit wire fraud, among other charges.

Last year, Garaufis dismissed a U.S. Securities and Exchange Commission lawsuit against Cohen, saying the government took too long to file its complaint.

The case is U.S. v. Cohen, 17-cr-544, U.S. District Court, Eastern District of New York (Brooklyn).

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