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The Elusive Mr. Kozeny

Today’s post is from Brian Whisler (here – a former federal prosecutor and current partner at Baker & McKenzie).


On March 28, 2012, the Bahamian Privy Council dismissed the U.S. Justice Department’s appeal of the lower court’s decision on jurisdictional grounds, largely though not entirely foreclosing the U.S. effort to extradite Victor Kozeny to stand trial and defend against FCPA/money laundering charges pending in the Southern District of New York.  (See here for the 2005 indictment).   The Privy Council’s opinion (here) reflects some unfavorable comments on the merits of the Justice Department’s extradition case, but did provide some leave for the U.S. to renew its extradition attempt. For now, Kozeny is free to remain in the Bahamas, but faces a pending extradition request from the Czech Republic (relative to defrauded investors), which was awaiting the outcome of the U.S. extradition request.

Whether the Justice Department will continue to pursue Kozeny after seven years of effort remains an open question. As the sentencings of the co-defendants in the Bourke/Kozeny matter (Bodmer, Farrell, and Lewis) have been deferred since 2005 pending extradition of Kozeny, there may be some pressure to dismiss against Kozeny and bring closure to the co-defendants’ cases.

The Kozeny quest illustrates the challenge associated with charging foreign nationals in FCPA cases (and criminal cases generally).  In the event that the U.S. authorities elect to dismiss against Kozeny, they may perhaps take some comfort knowing that Kozeny served 19 months in pre-trial detention in a Bahamian prison, while co-defendant Frederick Bourke was sentenced (though yet to serve) only 12 months, one day for his role in the conspiracy. It has also been reported that Kozeny has spent in excess of $1 million in legal fees fighting extradition to the United States.

Another Stumble For The DOJ In The Kozeny Affair

The DOJ continues to encounter problems in some of its signature FCPA prosecutions.

Earlier this month, it was the Giffen Gaffe (see here).

Last fall, U.S. District Court Judge Shira Scheindin (S.D.N.Y.) remarked at Fredrick Bourke’s sentencing that “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.” (See here).

And then there is Victor Kozeny, indicted along with Bourke, and the alleged mastermind of the fraudulent investment scheme related to the privatization of state-owned businesses in the Republic of Azerbaijan.

In 2005, Kozeny was criminally charged (see here) with, among other charges, one count of engaging in a conspiracy to violate the FCPA and twelve counts of violating the FCPA.

To make a long story short, Kozeny remains the most famous FCPA fugitive living a comfortable life in the Bahamas. The DOJ’s repeated efforts to extradite him from the Bahamas to the U.S. have failed. See here.

In the indictment, the DOJ asserted that “Peak House” a multi-million dollar property in Aspen, Colorado was the site of certain of Kozeny’s criminal activity.

Peak House was sold in 2001 for approximately $22 million and the DOJ sought civil forfeiture of the funds it alleged were connected to Kozeny’s criminal activity.

However, U.S. District Court Judge Harold Baer (S.D.N.Y.) recently concluded that the DOJ’s attempt was barred by the statute of limitations.

This latest DOJ setback in the Kozeny affair would seem embarrassing for the DOJ given that Judge Baer criticized the DOJ’s lack of diligence in even attempting to file a civil forfeiture suit in a timely fashion.

Judge Baer concludes his opinion (see here) by stating:

“It is unfortunate that this action, which appears to have some merit and involves a substantial amount of funds, must be dismissed on procedural grounds, but there is no question that the Government learned of the Peak House funds at the very latest by 2005 and sat on its hands until 2009.”

Brian Whisler (here), a former federal prosecutor and current partner in
Baker & McKenzie’s white collar practice and individual who brought this decision to my attention, noted that “this defeat on procedural grounds represents yet another bump in the road for DOJ in the Bourke/Kozeny matter and suggests that DOJ will likely persist in its pursuit of Kozeny now that a criminal conviction is legally required to effect forfeiture of the sale proceeds of Kozeny’s Aspen home and other assets.”


A Friday roundup of recent FCPA events.

An FCPA Sentencing Trend?

As noted in yesterday’s DOJ release (here), two former executives of Willbros International Inc. (a subsidiary of Houston-based Willbros Group Inc.) were sentenced for their roles in a conspiracy to make improper payments to “foreign officials” in Nigeria and Ecuador.

Jason Edward Steph was sentenced to 15 months in prison and Jim Bob Brown was sentenced to 366 days in prison.

For more on the Willbros matter, see here and here.

The DOJ’s sentencing recommendations appear to be sealed, but one can assume, given the “light” sentences, that perhaps the DOJ likely sought sentences greater than those issued by District Court Judge Simeon Lake.

If so, this would appear to continue a trend of judges sentencing FCPA defendants to prison sentences less than those recommended by DOJ.

For instance, in Frederic Bourke case, a case which involved a “massive bribery scheme” according to DOJ, Judge Shira Scheindin rejected the 10-year prison sentence proposed by DOJ and sentenced Bourke to 366 days in prison. (see here). In sentencing Bourke, Judge Scheindin is reported to have said “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crok or a little bit of both.”

With several FCPA sentencing dates on the horizon, this apparent trend will be an issue to watch.

See here for local media coverage regarding the sentences.

Kozeny’s Tan Not in Jeopardy

While Bourke (see here) prepares his appeal, Viktor Kozeny, the alleged master-mind of the scheme to bribe officials in Azerbaijan in connection with privatization of the state-owned oil company, will be staying put in The Bahamas as an appellate court again rejected DOJ’s extradition attempts.

As noted in the recent Bahamian Court of Appeals decision (here), Kozeny, a Czech national, has been living in The Bahamas since 1995 and has not departed the country since 1999.

The opinion notes that there is no dispute “that there was a conspiracy to corrupt the Azeri officials and that such officials were paid money, given gifts and provided shares in certain companies under the control of [Kozeny] without payment; and had certain medical procedures paid for them by [Kozeny].

Even so, the court concluded that while The Bahamas did indeed have a bribery/corruption statute, it applied only to bribes within The Bahamas or given to a Bahamian public officer. Thus, because Kozeny’s conduct would not violate Bahamian law, the appellate court upheld the lower court’s denial of the extradition request.

For additional coverage (see here and here and here).

According to these reports, the decision may be appealed to London’s Privy Council pursuant to Bahamian legal procedure. Kozeny’s U.S. lawyer is quoted as saying “enough is enough” and U.S. prosecutors should finally accept the fact that Kozney, a non-U.S. citizen, could not violate the FCPA as it existed in 1998 – the year in which the bribe scheme perhaps ended – although, as noted in the opinion, the U.S. alleges that the bribe scheme continued into 1999.

Why is this relevant?

Because the FCPA was amended in 1998 to include, among other provisions, 78dd-3 which applies the antibribery provisions to “any person” (i.e. foreigners) “while in the territory of the U.S.” from making use of the mails or any other means or instrumentality of interstate commerce in furtherance of an improper payment.

The SFO Continues to “Step-It-Up”

Today, the U.K. Serious Fraud Office (the functional equivalent of the DOJ) issued a release (here) indicating that a former BAE agent has been charged with “conspiracy to corrupt” for “conspiring with others to give or agree to give corrupt payments […] to unknown officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc.”

For local media coverage of the charges (see here).

With a new Bribery Bill expected in the U.K. by years end, the SFO continues to “step-it-up” (see here for more on the SFO).

Disclosing FCPA Compliance

Public companies dislose FCPA issues all the time. Rarely though do the disclosures concern issues other than internal investigations and potential enforcement actions.

Accordingly, two recent SEC filings caught my eye.

China MediaExpress Holdings, Inc. (a Delaware company) recently disclosed (here) that it:

“[e]ntered into a securities purchase agreement with Starr Investments Cayman II, Inc. Under this agreement, Starr will, subject to various terms and conditions, purchase from the Company 1,000,000 shares of Series A Convertible Preferred Stock and warrants to purchase 1,545,455 shares of the Common Stock of the Company for an aggregate purchase price of US$30,000,000.”

One of the conditions was that the company “shall have adopted a program with respect to compliance with the US Foreign Corrupt Practices Act” and a post-closing covenant obligates the company to “implement a program regarding compliance with the US Foreign Corrupt Practices Act not later than April 30, 2010.”

Cardtronics Inc. (an operator of ATM networks around the world) (here) recently disclosed (here) that:

“On January 25, 2010, the Board of Directors by unanimous vote approved three management proposed modifications to the Company’s Code of Business Conduct and Ethics. The modifications as approved by the Board include: (i) adding a section that addressed compliance with the Foreign Corrupt Practices Act and International Anti-Bribery and Fair Competition Act of 1998.”

Costa Rica Joins the Club

Last, but certainly not least, Costa Rica recently announced a first … the first time a foreign corporation has paid the government damages for corruption.

As noted here, telecom company Alcatel-Lucent recently disclosed a $10 million payment to settle a corruption case in Costa Rica in which it was accused of paying kicbacks to former Costa Rican President Miguel Angel Rodriguez (and others government officials) in return for a 2001 contract worth $149 million.

There has been FCPA/corruption issues on both sides “of the hyphen” as noted here in this recent Main Justice article.

And with that, have a nice weekend.

A Trip Around the World

Grab your bags and your passport, it’s time for a quick trip around the world.

First stop, Germany.


In December 2008, Siemens (a global corporation organized under the laws of Germany with shares listed on the New York Stock Exchange since March 2001) agreed to pay $800 million in combined fines and penalties to settle FCPA charges for a pattern of bribery the Department of Justice (“DOJ”) termed “unprecedented in scale and geographic scope.” The combined fines and penalties were easily the largest ever levied against an FCPA violator.

This week, Siemens announced (see here) that it “has come to an agreement about settlements with six further former Board members against whom damages were claimed in connection with past cases of corruption in the company.” See (here) for press coverage.

Next stop, the U.K.

SFO Charges Former DePuy Executive

The U.K.’s Serious Fraud Office (“SFO”) (an enforcement agency similar to the U.S. DOJ), recently announced (see here) that Robert John Dougall, the former Vice President of Market Development of DePuy International Limited was charged with conspiracy for “making corrupt payments and/or giving other inducements to medical professionals working in the Greek public healthcare system.” The SFO has previously indicated (see here) that it seeks to generally model DOJ’s enforcement strategies, and that model now seems to include a broad interpretation of the potential universe of recipients of improper payments (i.e. not just core government officials, but also employees of public healthcare systems). There is greater cooperation between law enforcement agencies around the world in investigating cases of alleged improper payments, a fact highlighted by the SFO release which notes that the case “was referred to the [SFO] by the [DOJ] and accepted in March 2008.” Depuy (see here) is “part of the Johnson & Johnson family of companies.” In February 2007, Johnson & Johnson disclosed a potential FCPA issue and the company’s most recent announcement on the issue is in its November 2009 10-K filing (see here).

Next stop, Australia.

Money to Print Money

The Age of Melbourne has reported (see here) that Securency International (see here) and certain of its executives are being investigated by the Australian Federal Police for alleged breaches of Australia’s criminal code which prohibit payments to foreign government officials to obtain a business advantage. According to the article, Securency (according to its website – a world leader in secure polymer substrate technology and the supplier of a range of unique substrates which are used for the printing of banknotes and other security documents), is also under scrutiny in the U.K., Vietnam, and Nigeria. The article notes that the Securency matter could be Australia’s first prosecution for foreign bribery.

Final stop, the beaches of the Bahamas.

Kozeny Extradition Hearing

While Frederic Bourke (see here) prepares his appeal, Viktor Kozeny, the alleged master-mind of the bribery scheme, continues to enjoy life in the Bahamas as U.S. government attempts at extradition have thus far failed. This week, the U.S. government’s appeal hearing was heard in the Bahamas. See here for press coverage.

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