Bahamas resident and former Grenada diplomat Viktor Kozeny, known internationally as “The Pirate of Prague”, faces extradition to the United States after being criminally indicted for a second time in New York.

Kozeny, 42, and co-defendants David Pinkerton, 44, who was in charge of American International Group’s private equity group, and Frederic Bourke Jr., 59, a private investor, have been accused of participating in a scheme to bribe senior government officials in Azerbaijan from 1997 to 1999 so they could gain control of a state-owned oil company during privatization.

They were indicted on a total of 27 counts regarding conspiracy to defraud the United States, foreign corruption, racketeering and money laundering at the U. S. District Court for the Southern District of New York on May 12, 2005.

The indictment was sealed until October 6 so that all three defendants could be taken into custody. Kozeny, who lives in the gated community of Lyford Cay, was arrested in the Bahamas on October 5 and was scheduled to make an appearance at the local court the next day.

Bourke, a resident of Greenwich, Connecticut, and Pinkerton, a resident of Bernardsville, New Jersey, “voluntarily surrendered to the FBI’s offices in Manhattan” on October 6, according to a press release issued by Michael J. Garcia, the U. S. Attorney for the Southern District of New York.

“The U.S. government intends to make a formal request for Kozeny’s extradition under the Extradition Treaty between the Government of the United States of America and the Government of the Commonwealth of The Bahamas”, stated the release.

Three unindicted co-conspirators, Thomas Farrell, Clayton Lewis and Hans Bodmer, “previously pleaded guilty in connection with their participation in this bribery scheme”, it added. Lewis, a U. S. national, was a principal of alleged scheme participants Omega Advisors Inc. and Pharos Capital Management Inc., investment funds that were both incorporated in Delaware and based in New York.

Farrell, also a U. S. national, worked for Kozeny; and Bodmer, a citizen of Switzerland, is an attorney with the Swiss law firm of von Meiss Blum & Partners and, inter alia, controlled escrow accounts for the scheme at Hyposwiss Bank, a Swiss bank with an office in Jersey, in the Channel Islands, it was alleged.

At the center of the alleged scheme are two Kozeny-controlled offshore companies, Oily Rock Ltd. and Minaret Ltd., which were both incorporated in the British Virgin Islands in 1997 and based in Baku, Azerbaijan, according to prosecutors. Explaining the alleged scheme, the press release stated: “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 Frederic Bourke, Jr., who made two investments in Oily Rock totaling approximately $8 million, on behalf of himself and family members and friends.

The institutional investors included American International Group, which invested approximately $15 million under a co-investment agreement with Oily Rock and Minaret.

David 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.

The Indictment alleges that Kozeny and the individual and institutional investors (collectively, “the investment consortium”) made their investments with the intent to acquire a controlling interest in SOCAR upon its anticipated privatization.

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

The Indictment charges that Kozeny, acting on his own behalf and as an agent of Bourke, Pinkerton, and other members of the investment consortium, made a series of corrupt payments and promises to pay to a senior official of the Government of Azerbaijan; a senior official of SOCAR; and two senior officials of the State Property Committee or “SPC”, the agency that was responsible for administering the privatization program.

Collectively, the four officials alleged to have been bribed are referred to as the “Azeri Officials”. According to the Indictment, the corrupt promises and payments to the Azeri Officials took a number of forms.

For example, in August 1997, Kozeny is alleged to have promised to transfer to the Azeri Officials two-thirds of the vouchers and options Oily Rock purchased, and to give the Azeri Officials two-thirds of all of the profits arising from the investment consortium’s participation in SOCAR’s privatization.

In return for this “two-thirds transfer”, the Indictment alleges that the Azeri Officials agreed to permit the investment consortium to acquire a controlling interest in SOCAR upon its privatization. In addition to this “two-thirds transfer”, the Indictment alleges that in June 1998, Oily Rock’s shareholders approved an increase in Oily Rock’s authorized share capital from $150 million to $450 million, and that the additional $300 million worth of Oily Rock shares was transferred to one or more of the Azeri Officials as a further bribe payment.

The Indictment further charges that a number of other bribes were paid to the Azeri Officials. Kozeny and others acting under his direction allegedly paid more than $11 million in total to the Azeri Officials in May and June 1998, of which approximately $6.9 million was wire transferred to accounts held for the benefit of certain of the Azeri Officials and their family members, and millions of additional dollars in cash were hand-delivered to one of the SPC Officials in his government office.

Kozeny is also alleged to have arranged for a representative of the London jeweler Asprey & Garrard to travel to Azerbaijan in May 1998 to deliver several gifts of jewelry and other luxury items to the SPC Officials, who in turn selected the gifts to present to the Senior Azeri Official on his birthday. According to the Indictment, the total value of these gifts was more than $600,000, which Minaret paid.

Kozeny and Bourke are also charged with arranging for both of the SPC Officials to travel to New York City on different occasions in 1998 to receive medical treatment, for which Oily Rock and Minaret paid. Kozeny, through Oily Rock and Minaret, also paid for the SPC Officials “hotel, meal and other expenses on these trips, as well as shopping expenses for one of the SPC Officials at a high-end department store in the New York area”.

All three defendants face up to 20 years in prison on the money laundering counts, plus a maximum fine of $500,000 or twice the value of the laundered funds. Prosecutors are also seeking an order requiring the defendants to forfeit $174 million regarding the money laundering counts.

The indictment was the second in the United States in the last two years against Kozeny, who was born in the former Czechoslovakia, holds an Irish economic passport, lives in the Bahamas, where he was once Honorary Consul for the island of Grenada, appointed by one of the Caribbean's most corrupt governments.

On October 2, 2003, he was indicted at the Supreme Court for the State of New York, in the County of New York, on 15 counts of grand larceny and two counts of criminal possession of stolen property concerning the same scheme for which he was recently indicted at federal court.

In that case, which is being handled by the office of Manhattan District Attorney Robert Morgenthau and is still open, Kozeny was accused of stealing $182 million from 15 investment funds managed by New York-based hedge fund Omega Advisors Inc. in the SOCAR privatization scheme.