The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Controversial Lyford Cay-based financier, Viktor Kozeny, is confronting a ‘ghost from his past’ over moves to enforce a $410 million judgment against him by seizing $22 million held in frozen New York bank accounts.

Documents filed in the New York State Supreme Court between May-July 2012, which have been obtained by Tribune Business, detail how Harvard Holdings - the Czech entity Mr Kozeny was found guilty of asset stripping in the mid-1990s - is moving to seize proceeds from the sale of the financier’s luxury Colorado home.

Harvard’s attorneys have moved fast following the failure of the US government’s attempts to extradite Mr Kozeny from the Bahamas to face charges of alleged money laundering and bribery relating to the privatisation of Azerbaijan’s oil industry.

The UK-based Privy Council rejected the US government’s arguments for the extradition in late March 2012, and filings by Harvard’s US attorneys said that following the ruling, the authorities had “not opposed” Mr Kozeny’s bid to unfreeze the $22 million.

As a result, Harvard has obtained a restraining order through the New York State Supreme Court to maintain the freeze until a further court hearing on September 5, 2012, thus preventing Mr Kozeny and his companies from accessing those funds - at least for the moment.

Papers relating to the case have been served on Mr Kozeny via Cayside Trust Company, based at Lyford Manor, according to court documents.

Edward Baldwin, one of Harvard’s US attorneys, in a June 2012 affidavit filed with the New York courts, detailed how Mr Kozeny had allegedly used a Turks & Caicos company, Landlocked Shipping, to acquire a luxury home in Aspen, Colorado, for $19.75 million in July 1997.

While title documents to the property, Peak House, were left in Landlocked’s name, Mr Baldwin alleged that a document related to the sale’s closing listed Mr Kozeny as the buyer. And cash to finance the deal had come from an entity listing Mr Kozeny as director.

A US judge had previously ruled that Mr Kozeny was Peak House’s beneficial owner, but the Bahamas-based financier entered into a deal to sell the property for $24 million on June 12, 2001.

The purchase price was reduced to $22 million, with the sale approved by the same US judge on the grounds that the proceeds be deposited into two Wells Fargo accounts that were frozen.

While those funds remain restrained, Mr Baldwin alleged that this “may be lifted very soon”, due to both the failure of the extradition bid and the US government’s failure to seize the $22 million via civil proceedings.

“Kozeny fled the US in 1999 for his estate in the Bahamas and has not left the Bahamas since,” Harvard alleged in its court papers.

“Kozeny has refused to face justice and has fought extradition to answer for his actions.

“To date, defendant Kozeny has evaded enforcement of the Prague judgment by maintaining his residence on a $29 million estate in the Bahamas. The Bahamas has not complied with Czech requests for the extradition of Kozeny.”

The need for Harvard to act, and potentially gain access to one of the few recovery sources available to it, became more urgent after Landlocked Shipping, on Mr Kozeny’s behalf, petitioned the US southern district of New York court to unfreeze - and release - the Peak House sales proceeds.

“The US government, given the lack of ability to extradite Kozeny, has not opposed Landlocked’s motion,” Mr Baldwin alleged,.

“The plaintiff [Harvard] sought to intervene in that case in order to prevent the restraining order from being lifted.

“This motion, and Landlocked’s petition to remove the restraining order, are under consideration and should be decided soon. If Judge Scheindlin lifts the restraining order, Landlocked will be free to transfer the funds to Kozeny’s offshore accounts.”

Harvard Holdings was allegedly founded by Mr Kozeny in 1991 to acquire the vouchers issued to Czech citizens that could be exchanged for shares in privatised state assets.

He allegedly convinced one million Czechs to hand over their vouchers to Harvard, which was supposed to invest them on their behalf.

Eventually, Mr Kozeny amassed enough vouchers to control 15 per cent of the Prague Stock Exchange.

The vouchers eventually peaked at $1.4 billion in value in December 1994, more than 30 times their original value, but Mr Kozeny then “embezzled funds” via 98 transactions - causing loss to thousands of Czechs.

The Prague courts ultimately found him guilty in July 2011, issuing the $410 million judgment. Harvard is alleging that Peak House was bought with funds taken from Czech investors.

This was where the nickname ‘Pirate of Prague’ came from, but the Privy Council earlier this year ruled that it had “no jurisdiction” to overturn the Supreme Court and Court of Appeal decisions to free him because there was nothing in the Bahamian constitution, or this country’s statute law, permitting it to hear such cases as that brought by the US extradition request.

The Privy Council found that two key counts in the US government’s indictment against Mr Kozeny were not extradition offences, because they involved acts which would not have breached Bahamian law had they occurred in the Bahamas.

And while not directly ruling on it, the Privy Council described as “persuasive” arguments by Mr Kozeny’s QCs that the US money laundering allegations against their client did not contravene the Bahamas’ Money Laundering (Proceeds of Crime) Act 1996.

The allegations claimed Mr Kozeny “conspired to transport legitimate funds invested by US investors from the US to a place outside the US with intent to promote the carrying on of an unlawful activity”. Yet the Bahamian Act only dealt with the movement/transfer of funds known to be derived from a criminal activity.