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US indicts investors on Azeri bribe charges
Financial Times
October 6, 2005
By Mark Turner in New York
A Czech financier and an employee of US insurance company AIG have
been indicted by US authorities for allegedly taking part in an
illegal scheme to bribe top Azerbaijan officials to buy its state oil
company on the cheap.
The decision, revealed on Thursday, marks a significant step in a
long-running saga believed to reach the very highest levels of the
Azeri government and involve a number of high-profile US investors.
Michael Garcia, the US attorney for the southern district of New York,
said Victor Kozeny, the alleged mastermind of the scheme also known as
the `Pirate of Prague', was arrested on Wednesday in the Bahamas,
pending an extradition request by the US.
David Pinkerton, who was managing director of AIG Global Investment,
and Frederic Bourke, a US handbag tycoon who invested money with Mr
Kozeny, surrendered to the Federal Bureau of Investigation in New York
yesterday.
The US authorities claim both knew of the plan to bribe senior
Azerbaijan government figures, and invested on the basis of that
knowledge. All three defendants were charged with conspiracy to
violate the Foreign Corrupt Practices Act and related crimes.
Mr Garcia also announced on Thursday that three other individuals
Thomas Farrell, an employee of Mr Kozeny's investment company Oily
Rock, Hans Bodmer, a Swiss lawyer, and Clayton Lewis, a principal of
Omega Advisors, a prominent New York hedge fund had previously pleaded
guilty in connection with their participation in the bribery scheme.
Mr Kozeny's alleged plan, hatched in the late 1990s, was to assemble a
group of investors to purchase privatisation vouchers, issued free to
Azeri citizens, ahead of the planned sale of the state oil company
Socar. Omega purchased $126m (105m, £75m) of vouchers, while AIG
purchased $15m, the indictment says.
Socar was to be the crown jewel of Azerbaijan's privatisation
programme, and the vouchers were bought for much less than they were
thought to be worth.
In the end the oil company was not sold. But any successful attempt by
foreigners to take control would have clearly needed top-level
approval.
The indictment charges that Mr Kozeny, acting on his own behalf and as
an agent of Mr Bourke and Mr Pinkerton, `made a series of corrupt
payments and promises to pay' a `senior Azeri official', a `Socar
official' and two top officials from the state property committee to
push the deal through.
Haydar Aliyev, the Azerbaijan president at the time, and his son
Ilham, the current president, were not named in the indictment, but it
says that Socar `could only be privatised with a special decree from
the president of Azerbaijan'.
It alleged Mr Kozeny arranged for jewellery worth more than $600,000
dollars to be sent from London's Asprey and Garrard to Baku on the
occasion of the `senior Azeri official's birthday on May 10,
1998'. That was the date of Haydar Aliyev's 75th birthday.
Gifts included a `triangular photo frame with clock 18 carat yellow
gold, mother of pearl, tourmaline and enamel,' worth more than
$100,000.
Other alleged bribes included direct cash payments of millions of
dollars, and the transfer of two-thirds of Oily Rocks' vouchers and
options to Azeri officials. Mr Garcia described the scheme as
`nothing less than the brazen attempt to steal the wealth of a
sovereign nation'. The irony, according to Mark Mershon, assistant
director in charge of the New York field office of the FBI, was that
`it appears that corrupt Azeri officials scammed the scammers'.
http://news.ft.com/cms/s/fca1b31c-369d-11da-bedc-00000e2511c8.html
Financial Times
October 6, 2005
By Mark Turner in New York
A Czech financier and an employee of US insurance company AIG have
been indicted by US authorities for allegedly taking part in an
illegal scheme to bribe top Azerbaijan officials to buy its state oil
company on the cheap.
The decision, revealed on Thursday, marks a significant step in a
long-running saga believed to reach the very highest levels of the
Azeri government and involve a number of high-profile US investors.
Michael Garcia, the US attorney for the southern district of New York,
said Victor Kozeny, the alleged mastermind of the scheme also known as
the `Pirate of Prague', was arrested on Wednesday in the Bahamas,
pending an extradition request by the US.
David Pinkerton, who was managing director of AIG Global Investment,
and Frederic Bourke, a US handbag tycoon who invested money with Mr
Kozeny, surrendered to the Federal Bureau of Investigation in New York
yesterday.
The US authorities claim both knew of the plan to bribe senior
Azerbaijan government figures, and invested on the basis of that
knowledge. All three defendants were charged with conspiracy to
violate the Foreign Corrupt Practices Act and related crimes.
Mr Garcia also announced on Thursday that three other individuals
Thomas Farrell, an employee of Mr Kozeny's investment company Oily
Rock, Hans Bodmer, a Swiss lawyer, and Clayton Lewis, a principal of
Omega Advisors, a prominent New York hedge fund had previously pleaded
guilty in connection with their participation in the bribery scheme.
Mr Kozeny's alleged plan, hatched in the late 1990s, was to assemble a
group of investors to purchase privatisation vouchers, issued free to
Azeri citizens, ahead of the planned sale of the state oil company
Socar. Omega purchased $126m (105m, £75m) of vouchers, while AIG
purchased $15m, the indictment says.
Socar was to be the crown jewel of Azerbaijan's privatisation
programme, and the vouchers were bought for much less than they were
thought to be worth.
In the end the oil company was not sold. But any successful attempt by
foreigners to take control would have clearly needed top-level
approval.
The indictment charges that Mr Kozeny, acting on his own behalf and as
an agent of Mr Bourke and Mr Pinkerton, `made a series of corrupt
payments and promises to pay' a `senior Azeri official', a `Socar
official' and two top officials from the state property committee to
push the deal through.
Haydar Aliyev, the Azerbaijan president at the time, and his son
Ilham, the current president, were not named in the indictment, but it
says that Socar `could only be privatised with a special decree from
the president of Azerbaijan'.
It alleged Mr Kozeny arranged for jewellery worth more than $600,000
dollars to be sent from London's Asprey and Garrard to Baku on the
occasion of the `senior Azeri official's birthday on May 10,
1998'. That was the date of Haydar Aliyev's 75th birthday.
Gifts included a `triangular photo frame with clock 18 carat yellow
gold, mother of pearl, tourmaline and enamel,' worth more than
$100,000.
Other alleged bribes included direct cash payments of millions of
dollars, and the transfer of two-thirds of Oily Rocks' vouchers and
options to Azeri officials. Mr Garcia described the scheme as
`nothing less than the brazen attempt to steal the wealth of a
sovereign nation'. The irony, according to Mark Mershon, assistant
director in charge of the New York field office of the FBI, was that
`it appears that corrupt Azeri officials scammed the scammers'.
http://news.ft.com/cms/s/fca1b31c-369d-11da-bedc-00000e2511c8.html