Bloomberg Businessweek: The Hedge Fund and The Despot

The following is an excerpt from the excellent article from the August 25-August 31, 2014 issue of Bloomberg Businessweek written by Cam Simpson and Jesse Westbrook on page 60 titled “The Hedge Fund and The Despot: Did a Wall Street Titan’s Money Bail Out Robert Mugabe In His Hour Of Need?” and I quote:

“The Hedge Fund and the Despot”

August 21, 2014

McGee had witnessed just a fraction of the violence aimed at swinging the second election, scheduled for June 27, 2008. In the weeks leading up to the runoff, there were thousands of casualties reported—and tens of thousands of refugees.

McGee wouldn’t find out for years, but as the attacks were unfolding, and as he worked with Washington to financially isolate Mugabe, a Wall Street consortium provided the $100 million for the dictator’s government. These millions secured the rights to mine platinum, among the most valuable of minerals, from central Zimbabwe. Several firms were involved in the investment, including BlackRock (BLK), GLG Partners, and Credit Suisse (CS). The most vital player was Och-Ziff Capital Management (OZM), the largest publicly traded hedge fund on Wall Street. An Och-Ziff spokesman declined to comment for this article. Now some of its African investments are at the center of an investigation by the U.S. Department of Justice and the Securities and Exchange Commission.
 
 
Och-Ziff, founded by Daniel Och in 1994, is a hedge fund titan, with an estimated $45.7 billion in assets under management. Large institutions such as the California Public Employees’ Retirement System, private foundations, wealthy families, and other fund management firms all put their money in its care. When Och took the fund public in November 2007, it became the foundation of a personal fortune estimated by Bloomberg to be about $3.7 billion.

In 2000, Och sent Michael Cohen, an American then in his twenties, to live and work in London. Cohen was a personal protégé of Och’s, according to testimony Cohen gave in 2010 in an unrelated London intellectual-property dispute involving the firm. In the spring of 2008, Cohen was in charge of picking and running Och-Ziff’s European and African investments, according to company filings and court testimony. Cohen declined to be interviewed.

An economics graduate of Bowdoin College, Cohen, according to an executive from another London hedge fund, was a cigar-chomping American who embraced a favorite pastime of English aristocrats—duck shooting. After a decade in the U.K., Cohen told the court, “I have forgotten a lot of my ‘American.’ ” He also revealed that “approximately 50 percent of [Och-Ziff’s total] assets are invested outside the United States, and 40 percent of our investors are resident or based in Europe.”

Photograph by Sunday Times/Gallo Images/Getty Images

London is a clearinghouse for investments in mining around the world, with about 140 mining companies currently traded on the AIM stock exchange. Many listed companies don’t make much money from actually taking minerals out of the earth. They exist mainly to explore for, or gain rights to, potentially lucrative minerals. Then they hope either to resell the rights for a profit or to get bought out by bigger mining or commodities companies.

The Central African Mining & Exploration Co., or Camec, was listed on the AIM exchange and wasn’t afraid of doing business in chaotic places. It attracted attention in the British press because its chairman was a retired English cricket star. But by February 2008, an Israeli diamond trader named Dan Gertler had negotiated the largest individual ownership stake in the company—almost 40 percent, to be held in family trusts. He forged a close relationship with Joseph Kabila, the former army chief and current president of the Democratic Republic of Congo, or DRC, and later amassed stakes in that country’s state-owned mining ventures, along with a fortune estimated by Bloomberg to be worth $2.5 billion.

A panel headed by former UN Secretary General Kofi Annan last year said the DRC, among the world’s poorest countries, lost about $1.4 billion when its government underpriced assets sold to Gertler. The businessman has denied any wrongdoing, and a London-based spokesman declined to comment for this article.

Not long after Gertler negotiated his stake in Camec, corporate records show, Cohen and Och-Ziff sought their own piece of the London mining company. It’s unclear just what brought Och-Ziff to the table, but a source familiar with its investment decisions, speaking on the condition of anonymity, says that Och-Ziff was primarily interested in Camec because of the DRC assets it was developing with Gertler. Attorneys representing Gertler say he played no role in bringing the hedge fund into negotiations to buy a piece of Camec. For its own part, Camec was looking away from the DRC and toward Harare.

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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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