Over the objections of the Department of Justice, the district court for the Eastern District of New York ruled that shareholders of a company victimized by an FCPA violation are entitled to restitution. The defendant in an FCPA case conspired to bribe judges in the Democratic Republic of Congo to rule against the company. This ruling in the DRC coerced the company’s shareholders into agreeing to a corporate takeover. The court found that the shareholders were victims of the bribe and entitled to restitution for the value of mining shares they lost as a result of the takeover.
Africo Resources Ltd. owned mining rights in the Democratic Republic of Congo. Unbeknownst to Africo, a former employee took the mining rights after obtaining a default judgment against the company in the DRC for wrongful termination. The former employee sold Africo’s rights to another company, Akam. Africo challenged the default judgment in DRC courts and ultimately convinced the DRC Supreme Court to review the matter.
While the case was pending before the DRC Supreme Court, OZ Africa Management and others conspired to obtain Africo’s mining rights. The scheme required the conspirators buy Africo and Akam, the company that held Africo’s mining rights. To make this work, the conspirators bribed the DRC judges hearing the Africo case so they would not rule on the matter until the Africo shareholders had agreed to the sale of the shares. The conspirators wanted to force the shareholders to choose between a possible loss in court—in which case the company would be worthless—or the sale of the company, which would give the shareholders some return on investment. The conspiracy worked: Africo sold the company to the conspirators, they obtained Africo’s mining claims, and ultimately obtained over $91 million in profit from the mining rights.
After being indicted by the U.S. government, OZ Africa pleaded guilty to conspiring to bribe officials in violation of the Foreign Corrupt Practices Act. The former Africo shareholders filed a motion requesting victim status under the Mandatory Victims Restitution Act (MVRA) and a restitution award for the money they would have received had the company not been defrauded out of its mining shares. Both OZ Africa and, interestingly, the government opposed the motion.
The court determined that the shareholders were entitled to a restitution award. The court found that although the shareholders had only lost intangible property—i.e., indirectly owned mining rights—they were victims under the MVRA. Additionally, the court found that the conspiracy and the bribe proximately caused the shareholders’ loss. The bribe, the court reasoned, helped the conspirators obtain a favorable result in the DRC courts. That result, in turn, influenced the shareholders decision to allow the acquisition of Africo, which ultimately allowed the conspirators to wrongfully obtain Africo’s mining rights.
The court, however, was unprepared to decide the amount of restitution and thus ordered the parties file supplemental briefing on the value of the mining rights.
