By Rob Urban and David Glovin
Viktor Kozeny promised investors in Azerbaijan
astronomical returns and then ran off with their money, prosecutors say. Now, the U.S.
wants to extradite him on charges of bribing Azeri officials.
A cold rain fell on downtown Manhattan on March 11,
1998, as Viktor Kozeny visited the Pine Street offices of Leon Cooperman’s Omega
Advisors Inc. Omega, a hedge fund manager of about $4.5 billion, was looking for
investments in emerging markets, and Kozeny, who’d made his fortune in post-communist
Czechoslovakia, had come to pitch one. Oil-rich Azerbaijan, he told three of Cooperman’s
lieutenants, offered a can’t-miss opportunity. The government of the former Soviet
republic would announce the sale of its Baku-based State Oil Co. of the Azerbaijan
Republic within months, Kozeny said, according to internal Omega documents that were
included in court papers filed by Kozeny.
Azeris could use government-issued vouchers to bid
for shares in Socar, as the company was known, at a price that vastly undervalued its
reserves, Kozeny said. Azeris could sell the vouchers, and Kozeny said he’d already
amassed $200 million worth. He wanted to raise about $100 million to buy more, grab
control of Socar and then sell it in a public offering. The investment would be worth
billions, he said. “You could wind up buying oil for pennies on the barrel,” says
Cooperman, 62, a former Goldman, Sachs & Co. partner.
Omega put $126 million into Azeri vouchers, after
Cooperman approved an investment of up to 2.5 percent of the funds’ net asset value.
Other U.S. investors included American International Group Inc., Goldman Sachs, Columbia
University and Frederic Bourke, co-founder of handbag maker Dooney & Bourke Inc.
Months after they made the investment, Cooperman and
his fellow investors lost everything, while Kozeny, 42, enriched himself, according to
Manhattan District Attorney Robert Morgenthau, 86, who charged the Czech in October 2003
with stealing $182 million. The Socar investors suffered the same fate that investigators
in the Czech Republic say befell hundreds of thousands of investors there five years
earlier. The investigators say Kozeny stole more than $300 million from shareholders and
are seeking formal charges.
Cooperman and the other investors struck back, filing
fraud lawsuits in 1999 and 2000 in the Bahamas, London and the U.S. that sought to seize
Kozeny’s assets worldwide. In response, Kozeny claimed some investors knew about his
scheme to bribe Azeri ministers–which investors deny–and he included in his court
papers internal memos he’d obtained from them. Kozeny also accused Azeri ministers of
cheating him, saying in a 2002 fraud suit in New York that they demanded kickbacks.
Kozeny now sits in a Bahamian jail, fighting
extradition to the U.S. on separate federal charges that he violated the Foreign Corrupt
Practices Act by bribing Azeri leaders. In October, Bahamian authorities arrested him at
the U.S. Justice Department’s behest. Kozeny is being held in a maximum security cell in
the island nation’s Fox Hill prison.
“The ability of Kozeny to sweet-talk his way into
upstanding people’s lives is one of the great con stories of the late 20th century,”
says Alex Angell, a former sales manager at Prague’s Wood & Co. brokerage who did
business with Kozeny. John Templeton, founder of Templeton Worldwide Inc., says he
divested his money from Kozeny’s funds on the advice of Wood & Co. “I stopped
having anything to do with him,” says Templeton, 93, a former neighbor of Kozeny’s in
the gated Lyford Cay community in the Bahamas. “When I did know him, my impression was a
bad one.”
In addition to Kozeny, three of his investors face
federal charges under the Foreign Corrupt Practices Act of conspiring to bribe Azeri
leaders: Bourke, Omega’s Clayton Lewis and AIG’s David Pinkerton. Bourke and Pinkerton
have pleaded innocent and are free on bail awaiting trial. Lewis–as well as Kozeny’s
former aide Thomas Farrell and Kozeny’s ex-lawyer Hans Bodmer–have pleaded guilty and
are awaiting sentencing.
Kozeny faces dozens of years in a U.S. jail if he’s
convicted of violating the law, which bans anyone doing business on U.S. soil from gaining
influence by paying bribes to officials in other countries. The Justice Department filed
16 cases under the act from January 2001 to October 2005, up from four in the prior four
years, according to New York–based law firm Shearman & Sterling LLP. The U.S.
Securities and Exchange Commission, which can bring civil proceedings against offenders,
brought three cases from 1995 to 2000 and filed 14 lawsuits from 2000 to ’05.
The U.S. government is far more interested today in
cross-border transactions, says Frederick Shaheen, a lawyer at Washington’s Greenberg
Traurig who served in the U.S. State Department. “It’s a pretty sexy thing for
prosecutors to go after,” he says. “It’s got major international intrigue. It’s
got government officials. It’s got briefcases full of money.”
Kozeny says he’s innocent. “I have been one of
the main architects of the privatization process in Eastern Europe,” he said in a
Bahamian court on Oct. 11 as he unsuccessfully sought bail. “I don’t feel I’ve done
anything wrong.” His mother, Jitka Chvatikova, visits three times a week. “It’s one
of the worst prisons in the world,” she says. Amnesty International criticized the
prison in a 2003 report for overcrowding, violence and cruel treatment. On Oct. 6, when
Kozeny was arrested, his New York–based lawyer, Benjamin Brafman, said Kozeny, who
isn’t a U.S. citizen, wasn’t subject to the Foreign Corrupt Practices Act and is
innocent of the bribery charges.
It’s a long fall from Kozeny’s heyday in the
1990s, when he presented himself as a rags-to-riches success and jetted between homes in
London and Aspen and his own private Bahamas island.
Nineteen-year-old Viktor Kozeny arrived in
Albuquerque, New Mexico, in the fall of 1982, claiming to be an aspiring physicist and a
refugee from communist Czechoslovakia. Kozeny had an invitation to study at the University
of New Mexico from physicist Marlan Scully, whom the young Czech had approached after a
lecture in Munich, Scully says.
Two subjects engrossed the freckle-faced
redhead–women and money, says Wolfgang Schleich, who briefly roomed with Kozeny in
Albuquerque and who’s now a professor at the University of Ulm in Germany. “He always
boasted about girls,” Schleich says. Kozeny also appeared to want a piece of one of the
university’s grants to study missile defense systems. He proposed a far-fetched effort
to use space-based mirrors to shoot incoming rockets, says Schleich, who concluded that
Kozeny knew little about physics. “The guy was a fake,” Schleich says. “He had big
dreams and was a big talker.”
By the spring of 1983, Kozeny had run off with Diane
Dyer, the 37-year-old wife of Graham Flint, then the director of the Air Force’s
Developmental Optics Facility in New Mexico. “He had a disproportionate amount of
self-confidence,” says Flint, 68, whose family housed exchange students like Kozeny.
“He was a good-looking man, very tall, very powerful and athletic.”
Kozeny and Dyer moved to Massachusetts and were
married in June 1983, according to state records. She briefly paid Kozeny’s way as he
enrolled in Harvard University’s summer school and later won admission to Harvard
College to study economics. They divorced in 1986.
Kozeny married and divorced again, months after
fathering a daughter, according to Massachusetts birth and divorce records. In 1989, after
earning a bachelor of arts in economics from Harvard, he spent six months as a 30,000
pound–a-year ($53,000-a-year) intern in corporate finance at Robert Fleming Holdings
Ltd., a London-based investment bank. His boss, Michael Ladenburg, says he was impressed
by Kozeny’s charm, intellect and memory. He says he fired the Czech after he failed to
do assigned work. “I fell for him,” Ladenburg says. “He’s certainly able to talk a
good story about anything.” Kozeny returned to Prague, the city of his birth, which was
in the midst of a renaissance following the 1989 overthrow of the communist government
that had ruled for almost 45 years.
When Kozeny arrived in Prague in 1991, it was a city
in a hurry. Playwright Vaclav Havel had been elected president after leading the Velvet
Revolution, and budding entrepreneurs were hungry to learn the ways of the West. Kozeny
had just $3,000 when he moved into a studio apartment in Prague, he said in a 1993
interview with Bloomberg News.
Finance Minister Vaclav Klaus had devised a plan to
sell stakes in the nation’s industry to Czech citizens. Kozeny, then 28, said he
parlayed his Harvard degree, language skills and investment banking experience into work
advising the ministry. He concluded that Klaus’s plan, which allowed citizens to buy
shares using vouchers they bought for $30, undervalued Czech industry. “Buying the
infrastructure of this country for $200 million–that’s laughable,” Kozeny said in
the 1993 interview. Klaus, now president of the Czech Republic, says Kozeny never advised
him. “Mr. President met Kozeny only once in his life, for 15 minutes in the Finance
Ministry,” Klaus spokesman Peter Hajek says.
In 1992, Kozeny founded an investment fund he named
Harvard Capital & Consulting, after his alma mater. Working from an office on the
outskirts of Prague, he launched a Western-style advertising campaign, and in newspaper
ads and on radio and TV, he promised investors a 10-fold return in a year. The ad campaign
gave a boost to Klaus’s slumping voucher program. “He made the market work,” Wood
& Co.’s Angell says. “Suddenly, people had something they understood.”
Prague’s stock market opened in 1993.
More than a million Czechs turned their vouchers over
to Harvard to invest. The fund focused on 51 of the biggest Czech and Slovak companies,
and its strategy earned it seats on the boards of two large banks, Komercni Banka AS and
Ceska Sporitelna AS; Slovak steel manufacturer VSZ AS, later acquired by U.S. Steel Corp.;
and Czech brewery Plzensky Pivovary, maker of Pilsner Urquell.
The gamble paid off. By March 1993, Harvard’s
holdings were worth 165 billion Czech koruna ($5.8 billion), more than 30 times the
original value of the vouchers he’d collected. Czechs who cashed out of the fund made as
much as $900 on their initial $30 investment. Kozeny, who charged investors a management
fee based on the funds’ value and collected a percentage of the companies’ dividends,
got rich managing their money. “Kozeny was the one who first realized what you could do
with all these assets you could buy for pennies on the dollar,” says George Collins, 44,
who built Credit Suisse First Boston’s asset management business in Prague.
Kozeny left the country in 1994, withdrawing from
day-to-day management of Harvard so, the fund said, he could scout opportunities
elsewhere. He and his secretary at Harvard, Ludka Cerna, whom he later married, settled in
Lyford Cay, where he bought the first of four homes. Kozeny quickly made friends in the
gated community of palm tree–lined streets that loop around canals and a golf course,
where his neighbors included Templeton and actor Sean Connery. One new friend was Michael
Dingman, an American expatriate who had made his fortune restructuring companies like
AlliedSignal Inc. “Viktor reminded me of myself at his age,” Dingman, then 64, said in
a 1995 interview with Bloomberg News. “He saw the opportunities.”
Kozeny obtained citizenship from Ireland and, like
Dingman, thrived in the Bahamas, which has no income tax. Kozeny told neighbors he was
teaching free enterprise to communists and stocking Eastern European hospitals with
mammography machines. “Everybody liked him,” says Mary Walker, 45, Templeton’s
assistant. “He’s very charming, and he’d talk about everything he was doing in
Eastern Europe.”
Kozeny, though, hadn’t finished with his Czech
investments. In October 1995, Dingman’s Cyprus-based company announced it had acquired
controlling stakes with Harvard in eight Czech companies. Kozeny and Dingman said they
wanted to restructure ailing industries. Instead, Czech prosecutors say, Kozeny, operating
from the Bahamas, made more than 100 transactions that moved assets from Harvard to a new
Cyprus-based company. Czech investigators say Kozeny stripped Harvard of assets worth more
than $300 million, leaving his remaining Harvard shareholders with almost nothing. Czech
state prosecutor Jaromir Jindrich says he’ll probably file criminal charges against
Kozeny. The Czech Republic has no extradition agreement with the Bahamas. “Kozeny really
undermined many people’s beliefs in a market economy,” says Jiri Pehe, an adviser to
former Czech President Havel.
Dingman didn’t return phone calls seeking comment.
Flush with his newfound wealth, Kozeny went on a
spending spree in 1997. He bought a home in London’s Eaton Square from composer Andrew
Lloyd Webber for 15 million pounds, says Sarah Kemp, a London-based spokeswoman for
Webber. He spent 13,000 pounds on dinner for three at London’s Le Gavroche restaurant. A
company Kozeny controlled spent $19.7 million for Peak House, a 24,000-square-foot
(2,230-square-meter) chalet atop Aspen, Colorado’s Red Mountain, according to court
records from a suit that investors filed against Kozeny in Colorado in 2000. The house
boasts a 1,000-bottle wine cellar and a cigar room dug out of an adjacent mountainside.
His neighbor was
handbag maker Bourke, whom he’d met through Dingman, says Bourke’s lawyer, Stanley
Twardy.
Back in the Bahamas, Kozeny added a $13 million pool
with an office, bar and underwater cavern to his $22 million beachfront home in Lyford
Cay; acquired a G-73 Mallard amphibian airplane; and cruised on a 165-foot (50-meter)
yacht, Contemplation. He even bought his own island, Hall’s Pond Cay, says Diane
Holowesko, an environmental adviser to the former Bahamian prime minister.
Kozeny also kept an eye out for new investments in
Latin America, China and the former Soviet Union. In May 1997, he, Bourke and others
journeyed through former Soviet republics on Kozeny’s private jet, according to a
federal bribery indictment unsealed in October against Kozeny. Two prostitutes joined
Kozeny on the plane, Twardy says. “Kozeny likes women,” he says.
Kozeny zeroed in on oil-rich Azerbaijan, a country
that Transparency International, a Berlin-based anti-corruption group, ranks 137th in its
list of perceived government corruption, tied with Liberia, Iraq and Uzbekistan. The
government had announced plans to sell off state-owned companies, and Azeri citizens had
received voucher coupons that allowed them to bid for shares of companies being auctioned.
Unlike the Czechs, the Azeris permitted foreigners to buy vouchers from Azeri citizens if
they purchased from the government a corresponding number of so-called options, which
allowed foreigners to buy vouchers.
To buy the options and vouchers, Kozeny formed two
Baku-based companies, an investment firm he called Oily Rock Group Ltd. and a bank
subsidiary he named Minaret Group Ltd., according to the federal indictment. One of
Minaret’s tasks was to bundle $5 million in U.S. currency into suitcases and fly it to
Azerbaijan to be used for vouchers and options, Kozeny claimed in a July 2000 document he
filed in the London lawsuit brought against him by investors.
Thomas Farrell, 41, Kozeny’s translator and
bodyguard, hired former Soviet soldiers to acquire vouchers at street markets, Kozeny
claimed in his response to the investors’ London lawsuit and in other court papers. In
August, Azeri authorities arrested a Russian courier who was working for Kozeny, seizing
$2 million in cash and vouchers, federal prosecutors say. A week later, with the courier
in jail, the Azeri KGB chief suggested that Kozeny meet with President Heidar Aliyev,
Kozeny claims in his court filings in London and elsewhere. “Aliyev stated that Oily
Rock needed his ‘good will,’” Oily Rock’s lawyers wrote in a 2002 fraud lawsuit
the company filed against Azeri ministers.
Aliyev referred Kozeny to his son, Ilkham–who ran
Socar then and is Azeri president now–and to senior officials on the privatization
committee, according to Kozeny’s London and Connecticut court papers. Their message was
clear to Kozeny: The Azeris wanted part of the profits from Kozeny’s Socar venture or
they’d cancel the millions of dollars in vouchers Kozeny had already acquired, Kozeny
says in his court papers. “Kozeny and the Azeri officials reached an agreement,”
federal prosecutors say in their indictment. Kozeny agreed to transfer two-thirds of his
vouchers and two-thirds of his profits to the Azeris, federal prosecutors say. Kozeny also
pledged to buy 4 million vouchers from people designated by Azeri officials, federal
prosecutors say.
In December 1997, the Azeris upped the ante, federal
prosecutors say in the indictment: They told Kozeny to buy 8 million vouchers from the
ministers’ friends and relatives.
Tahir Karimov, the consul at the Azerbaijani embassy
in Washington, says no Azeri officials accepted bribes. “It’s not possible,” Karimov
says.
To entice potential investors, Kozeny threw a party
at Peak House, his home in Aspen. Guests arrived in horse-drawn carriages on the evening
of Dec. 20, 1997, ferried from the gate below. Carolers flanked the front door. Inside,
Natalie Cole sang by a roaring fire. Kozeny, then 34, greeted the town’s elite by name,
periodically helped by a whispered prompt from party planner Peter Helburn. “Everybody
wanted an invitation,” says Helburn, who estimates the party cost $1.1 million. “We
had people calling, begging, asking who was on the guest list. It wasn’t so much stars.
It was people with tons of money–hedge fund people.”
That night, Ivana Trump, the Czech ex-wife of
developer Donald Trump, and fund manager Thomas McCloskey were among the people who dined
on a six-course meal that included caviar, oysters, truffles, lamb and lobster, Helburn
says. Kozeny worked the room, chatting with his guests and dropping references to his new
Azeri venture, Helburn says. “He really knew how to charm,” he says.
Aaron Fleck, founder of Florida money manager Aaron
Fleck & Associates, was seated near Dingman and Kozeny lawyer Bodmer, Fleck later
wrote in an affidavit in a 2000 lawsuit investors brought against Kozeny in Colorado.
Fleck, then 76, listened as they touted the Azeri deal and heaped praise on Kozeny, he
wrote. Intrigued, Fleck joined Kozeny and other potential investors from Aspen on a
January 1998 trip to Baku, where the group met Azeri government ministers and bankers from
Kozeny’s investment company, Minaret.
Fleck, whose fund managed $400 million, was enticed
by Kozeny’s claim that his investment could grow 100-fold. He put up $4 million for
shares of Oily Rock.
Fleck also opened his Rolodex. “I introduced Mr.
Kozeny to contacts of mine at a number of well-known investment firms in New York,
including Goldman Sachs, Allen & Co., Smith Barney and Omega Advisers,” Fleck wrote
in his affidavit in the 2000 Colorado lawsuit. Fleck telephoned Cooperman, paving the way
for Kozeny’s pitch to Omega.
“I was encouraged that several notable people
(including former United States Senator George Mitchell, Frederic Bourke, and Mr. Fleck)
were investors with Mr. Kozeny,” Cooperman later said in his affidavit.
Mitchell, a Maine Democrat, who left Congress in 1995
after six years as Senate majority leader, had long been friends with Bourke, says Twardy,
Bourke’s defense lawyer. In the winter of 1998, Mitchell joined Bourke and Kozeny for
dinner, and talk turned to Socar, Twardy says. Bourke’s private investment company
eventually put $8 million into the deal.
Mitchell, then 64, signed on and invested $200,000.
“I invested and agreed to be on the board on the advice of a friend,” he said in an
e-mailed statement. “My involvement in the project was extremely limited,” said
Mitchell, who’s not a defendant in any litigation. “My investment was lost.”
Mitchell was paid $100,000 annually and $50,000 in
child-care fees, court documents say. In April 1998, Mitchell accompanied fellow investors
to Minaret’s official opening in Baku, as his wife and baby stayed aboard a yacht Kozeny
had moored in Nice, France, Kozeny claimed in court papers.
Stanley Escudero, who was then U.S. ambassador to
Azerbaijan, says he warned Mitchell about Kozeny when the ex-senator visited Baku. “I
advised Senator Mitchell that he should look very carefully at what he was doing–that
Mr. Kozeny had a checkered reputation,” says Escudero, who now runs Shield Bearer LLC,
which advises foreign companies doing business in Azerbaijan. Mitchell’s assistant, Mary
Kremp, says he declined to comment further.
Investors brought in other investors, as Oily
Rock’s assets swelled to almost $450 million, the Baku-based company said in its 2002
fraud lawsuit against Azeri ministers. On March 26, 1998, days after Omega began buying
Azeri vouchers, Lewis, who oversaw Omega’s emerging-market investments, telephoned
Pinkerton, a managing director at New York–based AIG Global Investment Corp., which
manages more than $500 billion for American International Group, the world’s largest
insurer. Lewis invited AIG Global to invest, according to the federal indictment. As
Pinkerton and Rajveer Ranawat, a member of Pinkerton’s investment group, reviewed the
deal, two questions emerged, according to AIG memos that are included in court papers
filed by Kozeny. Was Kozeny trustworthy? And why would Azerbaijan sell its most valuable
asset?
AIG executives were split. Peter Yu, then head of AIG
Capital Partners Inc., warned his colleagues in a memo on April 14 to stay away from
Kozeny and said the Azeris wouldn’t sell Socar. “I am sure Alief will never give it
up!!!” Yu wrote, using another spelling for the president’s name. Yu also wrote,
“Some of our investors, such as his neighbor Sir John Templeton, have a dim view of
Kozeny.”
The warning went unheeded. In an internal AIG report
dated April 27 evaluating the proposed deal, Pinkerton’s group reported that a senior
Azeri minister promised Lewis over drinks that Socar would be sold. “Lewis claims to
have had 11 shots of vodka with him,” the report said. “The above-referenced statement
was made after three shots.”
AIG executives continued their due diligence. AIG
Vice Chairman Frank Wisner, a former U.S. ambassador to India and Egypt, chatted with
executives of Oily Rock. Pinkerton and Ranawat summarized Wisner’s conversation in an
April 30 memo for AIG executives, including Chief Investment Officer Win Neuger. “Alief
is involved in the deal,” said part of the memo, which is included in the court papers
that Kozeny filed. “However, the specifics of his involvement are not known.”
In June, Maurice Greenberg, then chief executive
officer of AIG, approved the investment, according to AIG documents included in Kozeny’s
court filings. AIG bought a $15 million stake in Pharos Capital Management, another fund
Lewis managed that also bought Azeri vouchers, and other blue-chip investors also joined
in.
Federal prosecutors accuse Pinkerton of knowing of
the bribery scheme when he encouraged AIG to invest. His defense lawyer, Barry Berke of
New York–based Kramer, Levin, Naftalis & Frankel LLP, denies that. “Pinkerton
first heard this allegation in response to his efforts to chase Viktor Kozeny around the
globe to recoup AIG’s investment,” Berke says. The Wisner memo, which prosecutors plan
to show jurors at the trial, indicates only that President Aliyev was involved in the
Socar sale, which isn’t illegal, Berke says.
Wisner, Neuger and Yu declined to comment.
Greenberg’s spokesman, Howard Opinksy, said the ex–AIG chief, who resigned on March 14
amid an investigation of the company’s accounting, didn’t recall details of the
transaction. Kozeny, meanwhile, was showering Azeri ministers with gifts, federal
prosecutors say. Throughout 1998, he paid medical bills for two Azeri officials who
visited New York for treatment. For Aliyev’s 75th birthday, Kozeny sent a representative
of London jeweler Asprey & Garrard to Baku with gifts, including a $383,000
diamond-studded box, the prosecutors say. Kozeny also paid $11 million in bribes to Azeris
and their relatives, they say.
“We would have never gone in had it been
represented that he violated the Foreign Corrupt Practices Act,” Cooperman says. He says
Lewis, who pleaded guilty in 2004 to bribery charges, had repeatedly denied conspiring
with Kozeny before confessing his guilt.
Socar investors began to get nervous when, by late
1998, the Azeris still hadn’t auctioned the company. Omega dispatched lawyer Eric
Vincent to salvage the deal. As they were returning from Baku, Kozeny gave Vincent a
report from the European Union detailing the price of options that Azerbaijan had sold.
Vincent learned that options that Kozeny claimed to have bought for $25 each had actually
been sold by Azerbaijan for as little as 50 cents apiece.
Manhattan District Attorney Morgenthau alleged in a
2003 statement that Kozeny pocketed more than $90 million by charging the investors $25
for vouchers and options he’d bought for much less. Vincent declined to comment.
“I called Viktor,” Cooperman says. “I called
five times without a response.”
Greenberg asked Omega to join in a lawsuit against
Kozeny, Cooperman says. In December 1999 and in 2000, the investors filed suit in the
Bahamas, London and other locales where Kozeny had property. Morgenthau later opened a
criminal investigation.
Bourke, who’s now accused by U.S. prosecutors of
conspiring with Kozeny to pay bribes, says he also began to gather evidence against
Kozeny. Twardy, his lawyer, says in court papers that Bourke hired an investigator and
brought documents detailing the investment to New York prosecutors. Bourke even complained
to President Aliyev about Kozeny’s scheme, Twardy says. “Ric is the one who blew the
whistle on the rip-off,” he says, denying Bourke’s guilt in the bribery case.
Kozeny’s legal troubles weren’t limited to the
Azeri deal. In October 2000, Ludka filed for divorce in London. The Bahamian government,
angered by Kozeny’s building of roads on his island, forced him to sell it back to the
government. Meanwhile, a U.K. judge began freezing Kozeny’s assets worldwide in response
to the investor lawsuits. Peak House was seized by investors, as were Kozeny’s mansion
in London and a home in Ireland. Although Kozeny still had access to money–he is
defended by lawyers from the Bahamas, London and New York and lived in a $9 million
house–civil suits may have cost him more than $100 million, a person familiar with the
cases says.
“I have no salary or income,” Kozeny wrote in
late 2003 in response to a Bahamanian lawsuit brought by Moscow’s Alfa Bank, which
claims Kozeny defaulted on part of a $50 million line of credit. Kozeny said he spent
$1,000–$2,000 a week. “I receive money once in a while from my mother,” he said.
“That’s how I pay my expenses.” The lawyers asked whether Kozeny’s family members
were holding assets for him, and he said no. They also asked how much cash he was then
carrying. “Thirty-four dollars,” he replied. “I lost everything in divorce
proceedings.”
Still, Kozeny had one more card to play. In 2000 and
2001, he met with Justice Department investigators and briefed them on the bribery scheme,
Kozeny said in the Bahamian court in October. Kozeny, apparently unaware that he himself
could be prosecuted under the bribery law, was threatening his investors: Either withdraw
the lawsuits or he would expose them to the Justice Department, lawyers involved in the
case say.
The Justice Department opened a case against Kozeny.
One by one, the Czech’s associates made plea bargains. Farrell pleaded guilty to a
bribery conspiracy in New York federal court in March 2003, saying he’d delivered
millions in cash to an Azeri minister. Lewis and lawyer Bodmer pleaded guilty too,
admitting they conspired with Kozeny. No one has been sentenced yet. All are helping
federal prosecutors in their case against Kozeny. “I am looking forward to these
courts,” Kozeny told a reporter for Czech daily Mlada Fronta Dnes in October 2003.
“The faster they will run after me, the harder they will get splashed on the wall.”
In the months before his arrest, Kozeny’s world was
shrinking. Kozeny would sometimes repair to Graycliff, a French restaurant in the Bahamian
home of 18th-century pirate John Howard Graysmith.
Once, Kozeny had brought friends there to consume
$20,000 bottles of wine from Graycliff’s famous cellar as he talked about his powerful
partners in Azerbaijan. A few weeks before his arrest, Kozeny came in alone, sipping
grappa and sitting for hours in an overstuffed armchair, says Enrico Garzaroli,
Graycliff’s owner. “He just looked like he didn’t have any other place to go.”
Now he doesn’t, except perhaps to a U.S. jail.
ROB URBAN writes features at Bloomberg News in New
York. DAVID GLOVIN covers the Manhattan federal court.
Bloomberg Markets, March 2006
23 Feb 2006
|
