In the Courts

Under the MVRA victim is defined as "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered including, in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern." The judge ultimately agreed with the shareholders argument that they fell within this definition, quoting their position summarized as follows in the ruling:

"… [Considering] that the defendant has admitted to bribing a court of law to delay and change a judicial ruling in order to obtain an asset — one that rightfully belonged to the Africo Owners and that the defendant otherwise could not obtain from the Africo Owners — the Africo Owners were obviously directly harmed, and harmed significantly. Indeed, that was precisely the goal of the defendant and its accomplices."

Judge Garaufis agreed that restitution was an appropriate remedy in these circumstances, finding that "the MVRA defines victims broadly" such as to include the shareholders as holders of intangible property rights who had in this case "lost a promising opportunity." He also found that the Africo shareholders' vote to accept the takeover by Gertler was made under duress given they could not have been aware of the bribery scheme underlying it. The ruling also disagreed with Oz Africa's argument that the court was barred from ordering restitution having accepted its guilty plea, as it had not yet accepted the parties' plea agreement. Also rejected were arguments that the loss was too speculative to calculate, with the Judge finding that while it would be a difficult calculation, that did not preclude the Africo shareholders from being victims under the MVRA.

The ruling left the question of valuation undetermined, asking the parties to submit additional filings on that point. While the former investors' expert report argued that they are entitled to as much as $1.8 billion in restitution on the basis that Africo would have held onto its interest and developed the mine as planned, the Och-Ziff parties rejected that amount as fanciful. In an early indication of his position on this issue, Judge Garaufis stated in a footnote that "the court does not believe that Claimants are entitled to a restitution award based on the full projected value of the Kalukundi Mine as if it had been developed. The property in question here is the misappropriated Kalukundi mining rights themselves, not a working mine on the site (although the two are linked)."

An analysis of the restitution amount, should the case proceed to that point, will be a complex exercise, with the court asking the parties for further information on, among other things, how to assign fault to the Och-Ziff parties as opposed to Gertler and corrupt DRC officials and how to determine which losses were caused by wrongful conduct "as opposed to the multitude of other potential problems with Congolese mining." Notably, under the MVRA restitution can be avoided if the process imposes too heavy a burden on the sentencing process.

The case is U.S. v. OZ Africa Management GP LLC, in the U.S. District Court for the Eastern District of New York (No. 1:16-cr-00515). Och-Ziff has recently announced plans to change its name to Sculptor Capital Management, effective Sept. 12, 2019.

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— Juliet Gunev, Mayer Brown LLP