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The Morning Brief: Och-Ziff Stock Plunges as DOJ Plays Hardball

Shares of Och-Ziff Capital Management plunged 12.6 percent on Tuesday, to close at an all-time low of $3.32, as the New York firm tries to hammer out a settlement with the U.S. government over its earlier bribery charge. The stock had dropped as much as 24 percent earlier in the day.

Och-Ziff is accused of violating the Foreign Corrupt Practices Act. The government is looking at an investment by a Libyan sovereign wealth fund in some of the Och-Ziff funds, investments by some of the Och-Ziff funds in a number of natural resources companies in Africa, and payments made by Och-Ziff to several African countries. The multi-strategy firm — one of a few alternative investment firms to be publicly traded on a stock exchange — is hoping to work out a deferred prosecution agreement, while the Department of Justice is looking for the firm to plead guilty. “It is certainly still our hope the investigation is concluded by the middle of this year,” Joel Frank, Och-Ziff’s chief financial officer and senior chief operating officer, said on the company’s recent quarterly earnings call. “We know the investigation has raised questions and created uncertainty; unfortunately, because it is ongoing, we cannot provide any further information at this point or speculate on the potential outcomes.”

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Nelson Peltz’s Trian Fund Management sold more than 10.5 million shares — or nearly its entire 9.9 percent stake — of Legg Mason at $32 per share to the Shanda Group, reducing its stake to just 0.48 percent of the total outstanding. In a regulatory filing, the activist hedge fund firm says it sold the shares for “portfolio management purposes.” Shanda Group is a Singapore investment company.

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Ramius said it has helped launch a new hedge fund, Margate Capital, headed by Samantha Greenberg. Margate is a multi-sector equity long/short alternative asset manager. According to a Reuters report, Ramius poured $130 million in seed money to the new fund. Greenberg was previously a partner and media/consumer sector head at Paulson & Co. Before that, she worked in Goldman Sachs’ Special Situations Group and at Chilton Investment Company investing in TMT and consumer stocks.

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Tuesday was a great day for onetime hedge fund manager Carl Icahn, with two of his biggest energy holdings surging in price. Chesapeake Energy jumped more than 34 percent to close at $6.05 following a nearly 20 percent gain on Monday after analysts seemed happy about a new credit agreement secured by the energy giant. At year-end Icahn was the company’s largest shareholder, with about 11 percent of the shares. Meanwhile, Freeport McMoRan, the energy and natural resources company, jumped nearly 7 percent. At the end of the fourth quarter, Icahn was the largest shareholder with about 8.3 percent of the shares. The stock is up about 12 percent in two days.

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It was not such a great Tuesday for hedge fund favorite Horizon Pharma. Shares of the biopharmaceutical company sank more than 26 percent after the company delivered worse-than-expected sales guidance. At year-end, the second largest shareholder was Stephen Mandel Jr.’s Greenwich, Connecticut-based Lone Pine Capital, with 13.13 percent of the total shares. Other top-ten holders included New York-based Deerfield Management and New York-based Visium Asset Management.

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Success Academy Charter Schools raised $35 million, including $25 million from the Robertson Foundation, at its anniversary benefit Monday evening. The Robertson Foundation was established in 1996 by Julian Robertson Jr. of Tiger Management fame and his late wife Josie. “I’ve been an investor for a long time; there’s no better investment than the education of all our children,” said Robertson in a press release.

Charter schools have attracted the support of a growing number of hedge fund managers, stirring up the passion of groups that support the status quo of the existing public education system and the powerful teacher’s union, which opposes these schools. Daniel Loeb of Third Point was the chair of the evening’s event, which was also attended by Greenlight Capital’s David Einhorn; Saba Capital’s Boaz Weinstein; Caxton Associates founder Bruce Kovner and his wife, Suzie; and Gotham Asset Management’s Joel Greenblatt. Last year, John Paulson of Paulson & Co. gave $8.5 million to Success Academy.

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