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War on Wall Street: Why billionaire Daniel Och is suing his former hedge fund for overpaying his own protege

In 2016, billionaire hedge fund manager Daniel Och agreed to pay nearly $2.2 million to settle charges that he violated US laws against bribery of foreign officials.

Och, US regulators said, had been warned by his own lawyer and chief financial officer not to do business with an ‘infamous’ Israeli businessman who routinely bribed Democratic Republic officials of the Congo, but did it anyway.

The settlement – the findings of which have not been admitted or denied by Och – stems from a major investigation into what regulators have described as “complicated and far-reaching” bribery schemes by the investment firm of Och Och-Ziff Capital Management to gain special access from officials in Libya, Chad, Niger and beyond, resulting in $413 million in fines for the company, jail time for one of its executives and the reported loss of a third of its assets.

Today, Daniel Och is mounting a lawsuit against his former company, now known as Sculptor Capital Management, accusing it of bad governance.

Yet, rather than anything about the company’s checkered past, Och’s legal case stems from a more pecuniary grievance: the high salary of its new chief executive James Levin.

In a complaint filed with the Delaware court system last month, attorneys for Och and his co-plaintiffs wrote that Sculptor’s “less than mediocre” performance and annual revenue of $626 million “cannot justify” Levin’s 2021 compensation package of $145.8 million – which the lawsuit alleges is more than Apple’s Tim Cook or JPMorgan Chase’s Jamie Dimon.

Since his appointment in April 2021, according to the lawsuit, Levin has been “dedicated to solidifying his position within the company, shaping the board of directors and using the resulting leverage to extract packages steadily increasing wages.

Och remains a major shareholder in Sculptor, with 14.4% of his voting rights, according to Reuters, and he mounted his lawsuit alongside four other major shareholders in the company.

The lawsuit claims Levin’s salary in 2021 was 17.7 times the median salary of CEOs at equivalent companies, despite Sculptor’s stock price falling more than 25% from its summer high of over 25% at the end of the year (it is now down 67 percent).

The sculptor quickly fired back, “Mr. Och’s filing is misleading and full of lies that present a grossly distorted view of corporate board governance. We look forward to setting the record straight anytime soon.” throughout the legal process…

“The acrimonious separation from Mr. Och has resulted in a grudge against the company and its executives which he continues to harbor.”

Indeed, it is the latest in a long drama between Och, Sculpteur and its new CEO. According to reports, Levin joined the company in 2006 and trained for years as Osh’s protege and planned replacement.

Och even booked Levin, then just 33, a whopping $250 million in salary, including 39 million in Och’s own shares.

But around Christmas 2017, Och suddenly had a change of heart and froze Levin, leading to another Credit Suisse managing director being brought in to smooth relations between the two tycoons.

The dispute prompted the departure of William Barr, who would later become famous outside of Wall Street as Donald Trump’s attorney general (until he was finally defenestrated in the days following the 2020 election for having publicly declared that it had not been stolen).

“I left him because of [my colleagues’ and clients’] faith in me,” Levin said Institutional investor in 2020. “Asset management is always about the team and the people ready to support the team.”

These were dark times for Sculptor. When Levin took the throne, the company was in its sixth consecutive year of losing more assets than it gained, with clients withdrawing a total of around $30 billion from the fund as a result of his corruption scandal.

Under Levin’s tenure, that trend reversed, with the first quarter of 2021 bringing Sculptor’s first net influx of assets since the scandal broke. By the end of the year, however, its earnings were below investor expectations, even though its assets had grown.

Last February, one of Sculptor’s board members resigned over what he described as “governance failures” that led to Levin receiving a “staggering award” despite “numerous warning signs”. ‘Warning”.

Board member J Morgan Rutman has close ties to Och, who originally appointed and now employs him as chairman of its family wealth management office.

Rutman took particular aim at the shares Levin received as part of his 2021 compensation package, which he said gave the chief executive a bigger vote on Sculptor than the founders of rival investment firms such as Blackstone and Apollo. do not benefit from it on their own creations.

Sculptor said at the time that Rutman’s letter contained numerous ‘inaccuracies’ and ‘unsubstantiated assertions’, arguing that all of his independent directors, except him, believed Levin’s compensation was in the best interest. shareholders.


The Independent Gt

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