Bloomberg News

Daniel Och Sued by Ex-Employee Achache Over 2009 Termination

March 13, 2012

Daniel Och, founder of Och-Ziff Capital Management Group LLC (OCH), was sued by a former employee, Arnaud Achache, who accused Och of forcing him out to boost his own interest in the company.

Achache, a citizen of France who lives in Beverly Hills, California, filed the complaint March 9in New York State Supreme Court in Manhattan, seeking more than $50 million in actual damages and more than $100 million in punitive damages.

Achache said he joined Och-Ziff in about July 2003 from Societe Generale SA (GLE) and became a non-managing member of the firm’s operating groups in January 2005, when he received a 1 percent ownership interest. Achache said he was terminated as a limited partner in March 2009.

“The defendants, acting by and through Och for his direct benefit, and to the detriment of plaintiffs, terminated Achache as a limited partner of the Operating Group Entities in violation of the Agreements of Limited Partnership, for the sole purpose of gaining for himself a larger equity interest in breach of his fiduciary duties,” according to the complaint.

Jonathan Gasthalter, a spokesman for New York-based Och- Ziff, declined to comment on the lawsuit today in a phone interview.

Och, a former Goldman Sachs Group Inc. (GS) trader, left the firm in 1994 to start a hedge fund for Ziff Brothers Investments LLC, which managed the Ziff family’s publishing fortune.

Switched in 1999

He oversaw money solely for the Ziffs for five years and then opened his fund to outside investors in 1999.

Achache said he specializes in capital structure arbitrage investments, which aim to profit from mispricing of different securities sold by the same company.

Och began to “systematically eliminate” limited partners at a rate of two a year after the company’s initial public offering in November 2007, and has forced Achache and at least five other limited partners to withdraw, taking back about 53 percent of their ownership interests, he said in the suit.

Achache said his membership interest was cut to 0.962 percent “without explanation” in January 2007 and he approached Joel Frank, chief financial officer of the firm’s operating group entities, to discuss it.

Frank said the decision was Och’s alone and that he should ask him for an explanation, according to the complaint.

Feared for Career

“By the tenor of his response, Mr. Frank made it apparent to Achache that it would not be in his best interests to contest this matter with Och,” the complaint says. “Achache did not contest this unilateral diminution of plaintiffs’ ownership interest because he feared for his career and ability to earn a living.”

Achache said he signed a separation agreement in May 2009 “obtained by fraud and by economic duress and coercion” that took back 75 percent of his unvested limited partnership interests, which the suit says have a fair market value of about $25 million.

“In connection with Achache’s visa status and his ability to retain the legal right to remain in the United States as a foreign national no longer employed by a U.S. company, Och expressly stated to Achache that defendants would assist him with the visa process,” according to the complaint. “However, defendants’ conduct thereafter made it clear to Achache that their ongoing assistance with the visa process was conditioned upon his agreement to the terms” of the separation agreement.

The case is Achache v. Och, 650737/2012, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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