Hedge fund Och-Ziff Capital Management and its founder, Daniel Och, recently entered into a deferred prosecution agreement with the Justice Department for dispensing millions of dollars in bribes in Libya, the Democratic Republic of Congo, Chad and Niger in violation of the Foreign Corrupt Practices Act.  As part of the settlement, they agreed to pay fines and disgorged profits, and to retain a compliance monitor for 3 years.

Yet, the reputational impact of the case may be the greatest harm to the firm, rather than the total payment to the government of about $413 million, one of the largest penalties ever assessed for violating the F.C.P.A.  For starters, investors had withdrawn more than $5.5 billion from its hedge funds this year, and settling criminal and civil cases is not going to make them any more confident in how the firm will perform.

Other collateral consequences may lead to difficulty for its future funding and investment activities. Och-Ziff will have to seek a waiver from the SEC from the automatic “bad actor” bar that would disqualify it from offering securities without having to go through the full disclosure process, and could be ineligible for the “well-known seasoned issuer” status that lets a company register its securities for sale more easily. The Labor Department will have to clear the firm to continue managing certain pension and retirement funds.

While such waivers have routinely been granted in the past, federal regulators may not be so quick to grant them in this case.  For example, Och-Ziff’s use of client funds to pay some of the bribes may give the commissioners pause in agreeing to any waivers, but in the end, it is likely that the firm will be allowed to avoid the consequences.