A fugitive Czech financier has been charged with stealing $182 million from clients of a New York City hedge fund, prosecutors said.
Viktor Kozeny stole the money from 15 investment funds managed by Omega Advisors that had agreed to invest the money in the expected privatization of the Republic of Azerbaijan’s state-owned oil company, an indictment handed up Thursday alleges.
When the privatization didn’t happen, Kozeny used $14 million of Omega’s money for personal expenses: $11 million to pay off a bank in Moscow and $3 million for luxury furnishings for his houses, the indictment charges. Another $73 million is unaccounted for, Manhattan District Attorney Robert Morgenthau said.
The indictment charges Kozeny with first-degree grand larceny and criminal possession of stolen property. Each charge is punishable by up to 25 years in prison upon conviction.
Morgenthau said he was trying to extradite Kozeny, who has taken refuge in the Bahamas, to New York.
Omega investors included Columbia University, which lost $15 million in the scheme, and the Goldman, Sachs investment firm, taken for $2.8 million, Morgenthau said.
Kozeny carried out his scheme in 1998 by persuading Omega’s money managers to invest in vouchers and options in the expected privatization of Azerbaijan’s national oil company, State Oil Company of the Azerbaijani Republic, or SOCAR.
Privatization vouchers are used by nations, including many former Soviet-bloc countries, when state-owned assets are sold to the public. The vouchers allow the country’s citizens to take part in the sale of the assets.
The vouchers may be freely traded or sold. In Azerbaijan’s case, non-citizens who wanted to buy into the sale also had to buy options for every voucher they purchased. The options were, in effect, a tax on foreign investors.
Kozeny promised he would use his own money to buy a block of vouchers and options and then use $182 million of the Omega funds’ money to buy a block. In this way they would together have a controlling block of SOCAR if it went up for sale.
In the meantime, Kozeny used $95 million from Omega to buy shares for the fund from his own holdings that he’d bought for $2 million, meaning he made a $93 million profit, Morgenthau said. When Omega managers learned that Kozeny had done this, Morgenthau said, they complained to the district attorney’s office.
Kozeny had drawn international attention years ago for his alleged financial schemes in his native Czech Republic in the 1990s during its transition to capitalism. The exploits earned him a reference as the “Pirate of Prague” form Fortune magazine.
Omega Advisors, a $3.5 billion hedge fund based in New York, was founded by Leon G. Cooperman, 60. Before starting Omega, Cooperman was with Goldman, Sachs for 25 years.
