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Entries in Bahamas (30)


Court Rulings Protect Bourke's Rights

Judge Shira Scheindlin has now decided most of the pending pre-trial issues in the Foreign Corrupt Practices Act prosecution of Frederic Bourke. Her rulings generally restrict the government's use of other-acts-type evidence, while allowing Bourke latitude to tell his story. He's charged with investing in Viktor Kozeny's 1998 attempt to take over Azerbaijan's state oil company -- despite knowing Kozeny planned to bribe Azeri officials to get the deal done.

Bourke's trial starts Monday in Manhattan. He faces up to 35 years in prison on the FCPA charges, money laundering and lying to federal investigators. Kozeny himself is a fugitive living in the Bahamas.

Here are some of the rulings from hearings held last week and Tuesday:

  • The judge excluded evidence relating to prostitutes and injections, saying it's too prejudicial to Bourke. Prosecutors had planned to show that Bourke, 62, thought his partner in their luxury handbag business was secretly trying to inject him with a "harmful substance." Prosecutors had also wanted to show how Kozeny and Bourke picked up two prostitutes in Russia in 1997, traveled with them aboard Kozeny's private plane to Baku, Azerbaijan, then back to Moscow. See our post The Bourke Files: Poison And Prostitutes.
  • Bourke can present a forensic accountant as part of his effort to interpret Kozeny's financial transactions for the jury. He's maintained that he invested with Kozeny only after lawyers advised him the deal didn't violate any laws. But soon after investing, he said, he suspected illegal behavior and became a whistleblower. He testified before a state grand jury as one of Kozeny's victims. In 2003, New York prosecutors charged Kozeny with fraud for keeping $182 million of his investors' money. See our post Lies Kickbacks And Other Crimes.
  • Kozeny's Swiss lawyer Hans Bodmer can be cross-examined by the defense about his former clients. He created the corporate entities and trust accounts Kozeny used to make his investments in Azerbaijan. Bodmer was indicted by a New York federal grand jury in August 2003 on single counts of conspiracy to violate the FCPA and to launder money. He eventually pleaded guilty to the money-laundering charge. Bourke's lawyers have argued that Bodmer also helped Kozeny pay kickbacks to Clayton Lewis and defraud other investors. See Lies Kickbacks And Other Crimes.
  • Prosecutors can offer a witness to testify about Azeri corruption in general (that would be Rajan Menon) and about Kozeny in particular. The government wants to show that Bourke should have been on notice of the likelihood of bribery and wouldn't have invested in a place like Azerbaijan unless he knew the fix was in. See our post Bourke v. The Professor.
Three government witnesses -- Thomas Farrell, Clayton Lewis and Hans Bodmer -- have all pleaded guilty to federal felony offenses related to the case. They'll be sentenced after they testify against Bourke. Until then, they're under the supervision of the U.S. Probation and Pretrial Services System. Among other things, that agency -- part of the U.S. federal courts -- prepares all pre-sentencing reports.

The "credibility, motive and bias" of the three cooperating witnesses will be an issue at the trial, Judge Scheindlin said. She ordered Pretrial Services to deliver their files on Farrell, Lewis and Bodmer to her courtroom "forthwith." She presumably wants the files on hand to make sure the prosecution has disclosed to Bourke everything pertinent about the three convicted witnesses and the circumstances of their testimony.

Judge Scheindlin has allotted six weeks for the trial.

We're grateful for the substantial help we've had from a friend in New York City for this and other posts about U.S. v. Kozeny.

Read all our posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.


Bourke's Defense Is Revealed, Then Sealed

Bloomberg's David Glovin filed a story Friday (here) reporting that Frederic Bourke will argue that he didn't violate the Foreign Corrupt Practices Act because there were no corrupt payments to foreign officials. Bourke, 62, was indicted in 2005 with Czech-born fugitive Viktor Kozeny, 45, for bribing government officials in Azerbaijan in a failed attempt to take over the state oil company known as Socar.

Bourke's trial on FCPA charges, money laundering and lying to federal investigators is scheduled to start June 1. He could be jailed up to 35 years if convicted on all counts. His co-defendant Kozeny has been a fugitive for about a decade. From the Bahamas, he's been fighting extradition to the United States. He's also wanted by the Czech Republic for allegedly looting a national pension fund.

Glovin learned details of Bourke's defense from a hearing transcript and other documents filed in the U.S. District Court in Manhattan. But after he obtained copies, Judge Shira Scheindlin sealed the documents from public view. Glovin reported, however, that at a December 24, 2008 hearing, Dan Webb, Bourke's lead trial lawyer at the time, said, “It is not clear if there was ever a bribery. Whether or not bribes actually got paid here, I am probably going to be refuting.”

Bourke invested and lost $8 million with Kozeny. The government alleged Kozeny's scheme to bribe Azeri leaders involved giving them vouchers that Azeri citizens could use to participate in privatizations. With $350 million from his investors, Kozeny was supposed to buy enough vouchers to gain control over Socar if it was privatized. U.S. prosecutors allege Kozeny and Bourke gave some of the vouchers to Azeri officials.

Now, though, according to Glovin's story, most of the vouchers can be accounted for. They're in the hands of Gerald O’Shaughnessy, another Kozeny investor who lives in Wichita, Kansas. O'Shaughnessy hasn't been charged in the case. "The documents tell of O’Shaughnessy’s years-long quest to recover the $350 million he and other investors gave Kozeny to buy vouchers," Glovin's story says. "According to the documents, O’Shaughnessy had gained control by 2003 of about three-quarters of the outstanding vouchers. He then sought to force the Azeris to buy them for $350 million so investors could recover their lost stakes, the documents show."

Leon G. Cooperman's Omega Advisors Inc. invested more than $100 million with Kozeny in 1998 for the Azeri privatization program. When the program fizzled, Omega and the other investors lost their entire investments. In 2004, Clayton Lewis, a former employee of Omega, pleaded guilty to conspiring to violate the FCPA in connection with the Kozeny investment. And in July 2007, Omega itself settled with the government, entering into a non-prosecution agreement with the DOJ and agreeing to a civil forfeiture of $500,000.

In addition to the federal FCPA indictment, New York state prosecutors charged Kozeny with fraud for keeping $182 million of his investors' money.

Bourke -- owner of the luxury handbag brand Dooney & Bourke -- said after his indictment in 2005 that he invested $8 million with Kozeny only after lawyers had advised him the deal was legal. Soon after, he said, he suspected illegal behavior. His lawyers said he traveled to Azerbaijan to warn then-President Heydar Aliyev about the scheme and he testified before a New York grand jury "as a victim of Kozeny's fraud."

Earlier this month, Bourke's lead trial counsel, Dan Webb, withdrew from the case. Bourke brought in new lawyers--Denver-based Harold A. Haddon and Saskia A. Jordan. In a March 6 letter to Judge Scheindlin, Webb said,

Mr. Bourke has requested that the Haddon firm serve as lead trial counsel in this matter and that I seek to withdraw my appearance. Going forward, I will cease to have any involvement in the case. At Mr. Bourke's request, my colleagues at Winston & Strawn will continue their involvement in the case through trial.

Harold Haddon's former clients include John and Patsy Ramsey and Kobe Bryant.


Last November, Webb raised the possibility that Bourke's prosecution was vindictive. He asked Judge Scheindlin then to review internal prosecution documents prepared before Bourke was charged. "The documents may show," Webb said, "whether prosecutors brought the case to punish Bourke for disclosing a crime involving the Socar deal and interfering in the U.S.'s relationship with Azerbaijan a decade ago."

A copy of the 2005 indictment against Kozeny and Bourke can be downloaded in two parts here and here.

A copy of Dan Webb's March 6, 2009 letter to Judge Scheindlin seeking to withdraw from the case can be downloaded here.

Read all posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.


Following Kozeny's Money

The Justice Department obtained a federal court order ten days ago against Viktor Kozeny, barring him from touching any of the proceeds from the 2001 sale of his Aspen, Colorado residence (left), amounting now to about $23 million. The government said the funds came from the money laundering offenses alleged in U.S. v. Kozeny, a federal criminal prosecution in New York that includes Foreign Corrupt Practices Act charges. A copy of the restraining order can be downloaded here.

The DOJ sought the order after Kozeny settled a nine-year-old London High Court case last month. Bloomberg has the story here. During the London suit, court orders obtained by the plaintiff, Omega Advisors, Inc., froze $177 million of Kozeny's assets, including the Aspen house. Last month's settlement resulted in the freeze orders being discharged. Omega had sued Kozeny for more than $100 million in damages -- the amount Omega invested in Kozeny's 1998 failed attempt to take over the Azerbaijan state oil company, Socar. Omega lost its investment and, in 2007, paid a civil penalty of $500,000 in an FCPA enforcement action brought because of bribery allegations in the Socar deal.

Czech-born Kozeny has been a fugitive for about a decade. From the Bahamas, he's been fighting extradition to the United States and the Czech Republic. He was indicted in 2003 in a New York state criminal case for stealing $182 million from investors, including Omega and AIG. And in 2005, he and co-defendant Frederic Bourke were charged under the Foreign Corrupt Practices Act for bribing Azerbaijan officials in the Socar privatization. Kozeny hasn't appeared in the case, which is scheduled for trial in June this year.

After Kozeny fled the jurisdiction of the United States, his house in Aspen sat empty. In 2001, a federal judge in Denver allowed the house to be sold, with the proceeds to remain frozen. The buyer, boss Richard Braddock, paid $22 million -- a Colorado record at the time. The money went into an escrow at Wells Fargo for Kozeny's creditors, where it still sits today.

Kozeny bought the "Peak House," as it's known, in 1997 for $19.7 million. It has 24,000-square-feet, five bedrooms and nine bathrooms and sits on Red Mountain, overlooking Aspen. Kozeny threw fancy parties there and hosted investment seminars for his wealthy neighbors. Frederic Bourke, Kozeny's eventual co-defendant in the FCPA case, was a part-time resident of Aspen when Kozeny was there.

The Justice Department's restraining order freezing the "Peak House" proceeds is bad news for Kozeny. Although he's entering his second decade of exile in the Bahamas, it looks like the Justice Department isn't likely to forget about him (or his money) any time soon.

* * *

Bloomberg's David Glovin visited Viktor Kozeny last year in the Bahamas. Glovin's account of their meeting (here) is a great piece of reporting and writing. Here's an excerpt:

. . . The life of a fugitive is tough, Kozeny says during three days of interviews at his $29 million estate in July. "I feel a little like Napoleon sent to St. Helena,'' the 45-year-old Czech native says of his life in the Bahamas, which he hasn't left since 1999.

"Havel was jailed,'' he says of the former Czech president. "People would have laughed if they saw him as a president.'' He rattles off the names of other famous figures who've been imprisoned: "Nelson Mandela. Alexander Solzhenitsyn.'' Kozeny says he plans to clear his own name and run for the European Parliament by 2014.

Prosecutors would like to thwart Kozeny's political ambitions and send him to jail. New York District Attorney Robert Morgenthau says Kozeny stole $182 million from Americans who invested in his 1998 bid to win control of an oil company in the former Soviet republic of Azerbaijan.

U.S. Attorney Michael Garcia in New York says Kozeny offered millions of dollars in bribes to Azeri leaders to cement the acquisition. Czech prosecutors, meanwhile, are presenting evidence to a court that is trying Kozeny in absentia on charges of embezzling $1.1 billion from mutual funds he established in the early 1990s. . . .


In Bourke's Case, We Stand Corrected

We never forget how many of our readers are real experts in the Foreign Corrupt Practices Act. And how generous they are with their help. It happened again late last week when they asked us to set the record straight in U.S. v. Kozeny. Although we'd posted recently that the prosecution in the Southern District of New York was over as to defendant Frederic Bourke, he and the government are in fact gearing up for a criminal trial. Here's what happened.

In September this year, we reported that Bourke -- indicted in May 2005 with Victor Kozeny and David Pinkerton over an alleged plot to bribe officials from Azerbaijan -- wouldn't face FCPA charges after all. In June 2007, the federal district court in Manhattan dismissed FCPA and related counts against the defendants. The court said the FCPA's five-year statute of limitations had already expired. The government appealed but the Second Circuit affirmed.

But here's what we missed. After Judge Shira A. Scheindlin’s initial decision dismissing charges based on the expiration of the statute of limitations, the government moved for reconsideration, which was granted. Judge Scheindlin then reinstated some of the charges before the issue went up on appeal to the Second Circuit. Thus, the case against Bourke is still pending for trial and has not been dismissed in its entirety.

(In preparing for Bourke's trial, Judge Scheindlin recently issued an opinion and order with a fascinating discussion about the FCPA's local-law defense; we'll talk about it in a separate post.)

So thanks to our friends for helping us out -- yet again.

As for Bourke's two co-defendants, the government dropped David Pinkerton from the case in July 2008. And Victor Kozeny is still fighting extradition from the Bahamas. There, says Bloomberg's David Glovin in a terrific profile and interview, Kozeny is under a Bahamian court order not to leave the island. The "Pirate of Prague," as he's called, spends 12 hours a day at his computer and claims he's broke and misunderstood:

The life of a fugitive is tough, Kozeny says during three days of interviews at his $29 million estate in July. "I feel a little like Napoleon sent to St. Helena," the 45-year-old Czech native says of his life in the Bahamas, which he hasn't left since 1999.
There's lots of great stuff in the story.

Finally, here are some apt words from Andrew Sullivan's article in the November 2008 edition of the Atlantic called Why I Blog:

The blogger can get away with less and afford fewer pretensions of authority. He is -- more than any writer of the past -- a node among other nodes, connected but unfinished without the links and the comments and the track-backs that make the blogosphere, at its best, a conversation, rather than a production.
To blog is therefore to let go of your writing in a way, to hold it at arm’s length, open it to scrutiny, allow it to float in the ether for a while, and to let others, as Montaigne did, pivot you toward relative truth. A blogger will notice this almost immediately upon starting. Some e-mailers, unsurprisingly, know more about a subject than the blogger does. They will send links, stories, and facts, challenging the blogger’s view of the world, sometimes outright refuting it, but more frequently adding context and nuance and complexity to an idea. The role of a blogger is not to defend against this but to embrace it. He is similar in this way to the host of a dinner party. He can provoke discussion or take a position, even passionately, but he also must create an atmosphere in which others want to participate.
Well said.



Good News For Mr. Pinkerton

A report yesterday from Dow Jones said the United States has dropped its sputtering prosecution of David B. Pinkerton on charges of conspiring to violate the Foreign Corrupt Practices Act.

The government had alleged that in June 1998, as the head of AIG Global Investment Corp., Pinkerton invested about $15 million of AIG's money in a consortium headed by Victor Kozeny -- with the understanding that Kozeny was bribing Azeri officials to ensure the privatization of the State Oil Company of the Republic of Azerbaijan (SOCAR).

Prosecutors last year suffered a double setback in the case. In June 2007, a federal district court in Manhattan dismissed all FCPA and related counts against Kozeny, Pinkerton and their co-defendant, Frederic Bourke, Jr. The court said the FCPA's five-year statute of limitations had already expired. The government appealed, but then in October the Bahamas Supreme Court ruled against Kozeny's extradition, refusing to order his return to the U.S. to face trial. He's from the Czech Republic and reportedly has Irish citizenship, but he's been living in the Bahamas for more than a decade.

Dow Jones said U.S. District Judge Shira A. Scheindlin's order of nolle prosequi dismissing the charges against Pinkerton was signed but hadn't yet appeared in the court's public electronic filing system. The report continued,

In the nolle prosequi request - a copy of which was reviewed by Dow Jones Newswires - Assistant U.S. Attorney Jonathan Abernethy wrote, "Based upon a review of the evidence and information pertaining to this defendant acquired since the filing of the indictment, the government concluded that further prosecution of David Pinkerton in this case would not be in the interest of justice."

No word yet on whether the government will also drop its case against Bourke.


Prosecutors obtained a related conviction in February 2004. Clayton Lewis, a former employee of Omega Advisors, Inc., pleaded guilty to conspiring to violate the FCPA. Then in July 2007, Omega itself settled with the government, entering into a non-prosecution agreement with the DOJ and agreeing to a civil forfeiture of $500,000. As the Justice Department noted then, Omega invested more than $100 million with Kozeny in 1998 for the Azeri privatization program. But the program fizzled and Omega lost its entire investment.



A safe and happy Fourth of July to our American readers. It's easy to be cynical, and somehow "patriotic" has become a slur. That's too bad. Expressing gratitude for the blessings of country and countrymen is always fitting. To be sure, our Republic reflects human nature -- all of it. The flaws and pettiness and insecurities are there, but so are our finest traits. And while Americans from left, right and center are often bothered by the messiness of our great experiment with democracy, we can all be proud that ours is still a country of freedom, opportunity and hope. See you next week.





Victor Kozeny’s Extradition From the Bahamas Is Denied

The Bahamas News Online Edition (The Bahama Journal) reports today that the Supreme Court there has ruled against the extradition of Victor Kozeny (left). The ruling means Kozeny is no longer under arrest in the Bahamas, which had detained him at the request of the U.S. government. He was indicted in the United States in October 2005 for violating and conspiring to violate the U.S. Foreign Corrupt Practices Act in connection with a scheme to bribe senior government officials in Azerbaijan.

On June 21, 2007, the U.S. District Court for the Southern District of New York dismissed all FCPA and related counts against Kozeny and his co-defendants, Frederic Bourke, Jr. and David Pinkerton, based on the running of the five-year statute of limitations. The Justice Department's appeal against the dismissal is still pending. If the charges are reinstated, only Bourke and Pinkerton will now go to trial.

According to the report, the Bahamas court said the FCPA charges against Kozeny were not provable or prosecutable under local law, and there was an abuse of the court process. Apparently the U.S. government did not properly disclose the U.S. trial court's dismissal of the FCPA charges on statute of limitations grounds, a failing the Bahamas judge cited as a reason for the ruling.

Victor Kozeny is from the Czech Republic. He reportedly has Irish citizenship and has lived in the Bahamas for more than a decade. American prosecutors had sought evidence against him and his co-defendants from the Netherlands and Switzerland. Delays in obtaining the evidence led to the running of the statute of limitations in the U.S. prosecution.

View the report from the Bahamas News Online Edition Here.

View a prior post about Victor Kozeny Here.

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