Three men charged for bribing officials in former Soviet Republic

Oct 06, 2005 02:00 AM

Three men including an executive with American International Group were charged with offering hundreds of millions of dollars -- as well as shopping sprees, jewellery and medical treatment -- to top officials in the former Soviet republic of Azerbaijan to get favourable treatment in oil deals.
Investment promoter Viktor Kozeny, Frederic Bourke Jr. and AIG executive David Pinkerton, were charged in a 27-count indictment in US District Court in Manhattan. The defendants each were charged with violations of the Foreign Corrupt Practices Act, which makes it a crime to offer payment to foreign government officials to obtain or retain business.

The indictment said Kozeny, 42, an Irish citizen of Czech background, was president and chairman of Oily Rock Group and Minaret Group when he and the two other men -- both American citizens -- tried to buy off senior Azerbaijan officials.
Bourke, 59, of Greenwich, Connecticut, was an investor with Kozeny. Pinkerton, 44, of Bernardsville, New Jersey, wasan executive at American International Group, a US-based insurance company. He, too, was part of Kozeny's investment group, authorities said.

Pinkerton was put on administrative leave at AIG until the charges are resolved, the company said. He was managing director of AIG Global Investment and was in charge of AIG's private equity group, the indictment said.
AIG said the investment in question was brought to AIG Global Investment Group by a New York investment fund which put together a group investing $ 180 mm. That group, AIG said, included an AIG subsidiary which invested approximately $ 15 mm in 1998.

AIG said no assets of AIG clients were invested in the transaction and that AIG, realizing it had been defrauded by Kozeny, joined other investors in bringing lawsuits against him in the United States, the United Kingdom and the Bahamas. It said it was cooperating with the probe by federal prosecutors and noted that no charges were brought against AIG.
US Attorney Michael J. Garcia said hundredsof millions of dollars in bribes were promised and tens of millions of dollars were actually paid in the scheme that ran from August 1997 until about 1999.
"The case that we bring today involves nothing less than the brazen attempt to steal the wealth of a sovereign nation," he told.

Azerbaijan, rich in oil resources, began privatising some of its state-owned enterprises in the 1990s, Garcia said. Garcia said the defendants tried to bribe key decision makers and corrupt the privatisation process.
Kozeny sent planeloads of cash from Switzerland to Azerbaijan to buy vouchers to purchase shares in the State Oil Co., which held the country's oil and gas reserves and its oil and gas exploration, production and refining facilities, Garcia said. Garcia said Bourke and Pinkerton knowingly participated in the scheme, bribing top Azerbaijan officials with jewellery, shopping sprees and medical treatment to ensure the national oil company would be sold "and that they would get their unfair share."

Mark J. Mershon, assistant director in charge of the FBI's New York office, said Kozeny's plan was to acquire millions of dollars worth of options to buy stock in the oil company to gain a controlling interest so the options could be resold for 10 times their value.
"Kozeny foresaw such a windfall that he could promise corrupt Azerbaijan officials two thirds of his profits and still make a killing," Mershon said. Kozeny never gained control of the oil company, he added.

Bourke and Pinkerton surrendered to the FBI in Manhattan while Kozeny was arrested in the Bahamas, where he was awaiting a court appearance. If convicted, the men face up to five years on each count of violating the Foreign Corrupt Practices Act. Bourke and Pinkerton each pleaded not guilty before Judge Richard Casey.
Barry H. Berke, Pinkerton's lawyer, said: "David Pinkerton has been wrongfully accused of being a criminal based on a passive investment that represents less than 1 % of the investment portfolio he managed."
Stanley A. Twardy Jr., a lawyer for Bourke, said: "We're looking forward to proving his case in court."

Benjamin Brafman, a lawyer for Kozeny, said the Foreign Corrupt Practices Act does not apply to him and he cannot be prosecuted for charges related to payments he allegedly made to foreign officials.
He said Kozeny has not decided whether to fight extradition.

Source: Associated Press
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