Lyford Cay Resident Nabbed

(Photo by Stephen Gay)

U.S. authorities want The Bahamas to extradite Lyford Cay resident Viktor Kozeny who appeared in a Nassau court on Thursday.

Kozeny, Frederic Bourke Jr. and David Pinkerton were charged with conspiracy to violate the Foreign Corrupt Practices Act, which makes it a crime to offer to pay, or to pay, foreign government officials in order to obtain or retain business.

The defendants are also charged with related crimes, including money laundering.

U.S. officials alleged that this particular crime came about as a result of wire transfers of millions of dollars to purchase Azeri vouchers and options, which in turn promoted violations of the Foreign Corrupt Practices Act.

The indictment further alleges that, beginning in August 1997 and continuing until 1999, Kozeny, Bourke and Pinkerton and others paid or caused to be paid millions of dollars worth of bribes to Azeri government officials to ensure that their investment consortium would gain a controlling interest in SOCAR and be able to reap huge profits from its ultimate resale in the market.

Kozeny, who is originally from the Czech Republic but has Irish citizenship, was arrested by Bahamian law enforcement authorities on Wednesday pursuant to a provisional arrest request made by the U.S. government.

On Thursday, Kozeny, 42, appeared before Magistrate Carolita Bethel in a Nassau court.

Assistant Director of Public Prosecutions Francis Cumberbatch represented the government of the United States, and attorney, Deon Smith represented the accused.

Magistrate Bethel told Kozeny that a review of the charges against him will have to take place before a decision is made on whether he will stand trial in The Bahamas or in the United States.

She explained that if any of the charges were committed in this jurisdiction, the accused would have to stand trial here.

However, if they were committed in other jurisdictions, Kozeny would be discharged in a Bahamian court and extradited to New York.

Magistrate Bethel said the review would be completed by December 5. Kozeny was remanded to Her Majesty’s Prison and a bail hearing is set for today.

According to the 27-count indictment, Kozeny controlled two companies, Oily Rock Ltd. and Minaret Ltd., which participated in a privatization program in Azerbaijan.

Under that privatization program, Azeri citizens could use free government-issued vouchers to bid for shares of state-owned industries that were to be privatized.

Privatization vouchers were bearer instruments that were freely tradable, and they typically were bought and sold using United States currency. Foreigners could also participate in Azerbaijan's privatization program and own vouchers, but only if they purchased a government-issued "option" for each voucher they held.

The indictment alleges that beginning in July 1997, Kozeny directed others to purchase vouchers and options on behalf of Oily Rock and Minaret. According to the indictment, these vouchers and options were purchased using millions of dollars of cash that was flown into Azerbaijan on Kozeny’s private jet and on planes he chartered.

The indictment further alleges that various individuals and institutions invested together with Kozeny in privatization vouchers and options. Among the individual investors was Bourke, who made two investments in Oily Rock totaling approximately $8 million, on behalf of himself and family members and friends, according to the indictment.

U.S. officials said the institutional investors included American International Group (AIG), which invested approximately $15 million under a co-investment agreement with Oily Rock and Minaret, the indictment said.

Pinkerton, a managing director of AIG in charge of AIG's private equity group, was responsible for supervising AIG's investment in Azeri privatization.

In addition to AIG, other institutional investors in this privatization venture included the Wall Street hedge fund Omega Advisors, Inc. and its affiliated investment fund Pharos Capital Management, L.P., which together purchased approximately $151 million in vouchers and options, according to the indictment.

The indictment alleges that Kozeny and the individual and institutional investors made their investments with the intent to acquire a controlling interest in SOCAR upon its anticipated privatization.

"Corrupt payments to foreign officials, such as the ones charged in this indictment, are a global threat to democratic institutions and fair competition. We will vigorously prosecute those who make illegal payments to corrupt foreign officials," said Michael J. Garcia, the United States Attorney for the Southern District of New York.

Alice S. Fisher, assistant attorney general in charge of the Criminal Division, added, "Representatives of American businesses overseas cannot be allowed to bribe their way into lucrative contracts or illegally purchase the favour of foreign government officials.

"Business conducted abroad must be done with honesty and integrity. Those who violate U.S. law in their financial dealings, here or in other countries, will face serious consequences."

The conspiracy to violate the Foreign Corrupt Practices Act and Travel Act count, and the false statements counts each carry a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss resulting from the alleged violations.

The money laundering conspiracy and substantive counts each carry a maximum penalty of 20 years in prison and a maximum fine of $500,000 or twice the value of the laundered funds.

Finally, the indictment contains a Forfeiture Allegation seeking the forfeiture by the defendants of $174 million that was involved in the charged money laundering offenses.