Giant New York Hedge Fund Och-Ziff Under Investigation For Bribery in $100 “Loan” to Zimbabwe Dictator Mugabe

One of the most interesting articles I published last year, but one that failed to receive the attention it deserved, was related to a $100 million “loan” to Zimbabwe’s brutal dictator Robert Mugabe, in which Wall Street firms played a key role. The post was titled, The Bailout of Robert Mugabe – How Wall Street Money Led to Intimidation, Torture and Death in Zimbabwe. Here are a few excerpts:

Four days later, Camec announced it was using the money it raised to purchase a joint venture with the Zimbabwe Mining Development Corp., or ZMDC, Mugabe’s state-owned mining company. The joint venture owned the platinum stakes on the Great Dyke that had been taken back just a few weeks earlier from Anglo American. The price included $5 million in cash; Camec issued shares to partners whose identities were shielded by a shell company based in the British Virgin Islands; and $100 million to Mugabe’s government. Camec said the $100 million was a cash loan “to comply with its contractual obligations to the government of Zimbabwe” for the platinum claims. It said the money would be repaid out of ZMDC’s share of future platinum earnings. Camec’s balance sheets for the period make clear that funding for the platinum rights came from the private transactions involving Och-Ziff.

The $100 million figure mentioned above that flowed directly to Zimbabwe’s brutal dictator Robert Mugabe was more than just a cash infusion to a corrupt dictator. Rather, it was a veritable political lifeline to a desperate and vulnerable despot. Facing defeat in the initial round of elections to the opposition, and with the nation’s currency hyper-inflating, the only thing he had at his disposal were valuable platinum assets that were at the time held by Anglo American Platinum. So Mugabe did what any desperate tyrant would do. He expropriated the assets from Anglo-American and immediately put them on the market to raise money to crush his opposition. Enter Wall Street.

This is where the Central African Mining & Exploration Co., or Camec, sniffed opportunity. Seemingly set up specifically to buy assets on the cheap from desperate African dictators, Camec immediately set out to raise funding to provide Mugabe with much need cash in exchange for the recently stolen platinum assets. Camec had no trouble raising this money from a variety of Wall Street firms, with the core participant being the massive hedge fund Och-Ziff, which contributed 75%, but also included BlackRock, GLG Partners and Credit Suisse.

Mugabe immediately used the money to intimidate, torture and murder opposition leaders until his primary opponent pulled out of the race. The ninety year-old Mugabe remains in power, while many of the Wall Street titans have retired lavishly to multi-million dollar retreats in the English countryside.

The excellent Bloomberg article from which that post was based, mentioned that Och-Ziff was under investigation by the Justice Department. I noted at the time:

Let the Justice Department and SEC investigate. Nothing meaningful will come out of it. Too many rich and powerful people got paid, and as Larry Summers so crudely admitted in 2009 “insiders don’t criticize insiders.” Just like how Jaime Dimon got a 74% raise in 2013 despite “settling” for $13 billion despite “doing nothing wrong” (in case you missed it, you must read: Jamie Dimon’s Big $13 Billion Secret – The Truth Behind the JP Morgan Settlement).

Fast forward one year, and the Wall Street Journal is reporting that Och-Ziff is close to “settling.” From the WSJ:

U.S. authorities are investigating whether Och-Ziff Capital Management Group LLC knew that part of a $150 million investment in a small African miner would wind up in the hands of Zimbabwe President Robert Mugabe’s government, according to people familiar with the probe.

Och-Ziff last year disclosed that a broader Justice Department and Securities and Exchange Commission investigation is examining the $47 billion New York hedge fund’s business in Africa under the Foreign Corrupt Practices Act. The act bars firms doing business in the U.S. from giving money or items of value to foreign officials for business, either directly or through intermediaries.

The publicly traded hedge-fund firm is in talks to settle the probe into its ties to a network of investors and deal makers that it worked with on business from Libya to South Africa, according to people familiar with the investigation. Och-Ziff and others have poured hundreds of millions of dollars into mining operations in the past decade as commodities prices soared.

Och-Ziff has denied that it knew some of the money would end up with the Zimbabwe government. Human-rights groups said the funds were used to carry out a violent crackdown on the opposition during a tough election Mr. Mugabe ultimately won in 2008.

U.S. investigators are scrutinizing a March 2008 trip to Zimbabwe taken by Och-Ziff’s Africa director at the time, Vanja Baros,according to people familiar with the investigation. The people said Mr. Baros met several people involved in channeling the money to the Mugabe government, including Billy Rautenbach, a Zimbabwean businessman with close ties to the dictator.

Mr. Rautenbach at the time of Camec’s move faced an arrest warrant in South Africa for alleged fraud, corruption and theft. In 2009, he pleaded guilty on behalf of a company he controlled to fraud charges and paid a fine of about $5 million.

“Fraud, corruption and theft. Eh, just pay a fine, no biggie!

In late 2008, the U.S. Treasury Department put Mr. Rautenbach on a list of what it called Mr. Mugabe’s “cronies” and said he “provided logistical support for large-scale mining projects in Zimbabwe that benefit a small number of corrupt senior officials.” The Treasury removed Mr. Rautenbach from the list in 2014; the agency said that after a review, Mr. Rautenbach no longer warranted inclusion.

Mr. Rautenbach met the Och-Ziff Africa director, Mr. Baros, in a mid-March 2008 gathering in Zimbabwe, along with a Camec executive and others, people familiar with the visit said. The trip was organized by Credit Suisse Group AG analysts who were optimistic about the company, these people said. The group visited a trucking operation used to service Camec’s Congolese mining projects and had dinner, the people said. They also visited the Congo and Mozambique, the people said.

Och-Ziff’s connection to the loan—disclosed in 2012 in the South African press—has raised concerns from at least one big investor.

In a September 2013 letter to the California Public Employees’ Retirement System, the biggest pension fund in the U.S. by assets known as Calpers and a onetime Och-Ziff investor that had questioned it about the Zimbabwe loan, the hedge-fund firm said it was a “passive shareholder of Camec” and that it “does not believe that any employee knew that Camec intended to provide funds raised from the offering to the regime of Robert Mugabe.”

A spokesman for Calpers, which last year shed its investments in hedge funds, including Och-Ziff, declined to comment.

In this case, it’s not just about theft and destroying the world economy. Giant financial firms can apparently just “settle” even when grotesque human rights abuses occur. This is how “justice” works in America.