The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Controversial Lyford Cay financier, Viktor Kozeny, has responded to attempts by the Czech authorities to seize $22 million of his alleged assets by seemingly ‘vanishing’, attorneys denying he has any ownership interest in the company to which the funds belong.

Court documents filed on Monday this week in the New York State Supreme Court, which have been seen by Tribune Business, allege that Mr Kozeny has no connection to Landlocked Shipping, the Turks & Caicos company that owned the Colorado house whose sale generated the $22 million now being fought over.

This newspaper revealed earlier this year how Harvard Holdings, the Czech entity Mr Kozeny is accused of asset stripping in the mid-1990s, had moved to seize the funds, which had been frozen in a New York bank accounts.

Harvard Holdings had successfully obtained an Order to maintain the freeze until a court hearing later this month, fearing that the collapse of the US government’s efforts to extradite Mr Kozeny to face money laundering and bribery charges relating to the privatisation of Azerbaijan’s oil industry would result in their release to Landlocked Shipping.

The Czech authorities want the $22 million to help meet a $410 million judgment against Mr Kozeny in his homeland, but they face a fight to seize it.

James Nesland, the US attorney for Landlocked Shipping, alleged in a series of affidavits: “[Harvard] seeks to enforce the judgment against Landlocked on the grounds that it purportedly is Mr Kozeny’s alter ego.

“It is undisputed, however, that the funds belong solely to Landlocked Shipping Company, not Mr Kozeny.... Putting aside that Mr Kozeny is neither a legal nor beneficial owner of Landlocked, nor its alter ego,” the claim failed to meet New York’s Recognition of Foreign Country Money Judgments Act.

In legal arguments on why the New York court should unfreeze the funds, Landlocked’s attorney said the state’s southern district court had previously rejected the US government’s claim that Mr Kozeny was ‘the real owner’ of the company and former Colorado house.

Instead, Mr Nesland argued that Mr Kozeny’s mother, Dr Jitka Chvatik, was the “sole beneficial owner” of Landlocked and the house. He produced affidavits from both Dr Chvatik and Ervine Quelch, Landlocked’s Turks & Caicos administrator, to back this up.

“[Harvard] has presented no evidence from any witness with personal knowledge showing that Mr Kozeny is the legal or beneficial owner of Landlocked,” the court documents alleged.

“Thus, it has not shown that it probably will succeed in enforcing the Czech Criminal Judgment against Landlocked.

“[Harvard’s] claim that Landlocked is Mr Kozeny’s alter ego is based on 12-year-old, non-binding findings that a federal judge in Colorado made when he issued a preliminary injunction - that he later lifted - after his order’s key conclusions were disproved. Such ‘findings’ do not remotely satisfy [Harvard’s] burden to prove that it probably will succeed on its claim against Landlocked.”

Mr Nesland also demanded that Harvard pay a $1.25 million bond to cover any costs and damages that Landlocked might incur if the account freeze continued, but the latter later win its case.

In her affidavit, Dr Chvatik said that while Mr Kozeny located Aspen House and worked on its purchase, he was not an owner of Landlocked.

“Viktor had no interest in Peak House and has no interest in Landlocked’s accounts,” she added.

Mr Quelch was just as forthright: “I do not know Viktor Kozeny. I have never met, communicated with or received instructions from Viktor Kozeny.”

And the Lyford Cay financier’s attorneys further argued: “Even if the Czech Criminal Judgment were enforceable against Mr Kozeny, it is undisputed that Landlocked owns the funds. And the Czech Criminal Judgment is not enforceable against Landlocked......

“In sum, [Harvard] has offered nothing but unsubstantiated assertions that Landlocked is Mr Kozeny’s alter ego. In contrast, Landlocked has submitted the detailed declarations of Mr Quelch and Dr Chvatik which explain, among other things, Landlocked’s origins and Dr Chvatik’s status as its sole beneficial owner.

“Judge Baer noted in rejecting the [US] government’s argument that Landlocked and Dr Chvatik lacked standing to claim the funds in the civil forfeiture proceeding: ‘There is no evidence that Kozeny directly controlled Landlocked.

‘Dr Chvatik provided a fairly detailed narrative in both her deposition and declaration as to why she wanted to purchase a ski resort residence, how she came upon Peak House through Kozeny’s efforts, why he was so involved in its purchase, maintenance and use, and how she personally used it regularly for vacation’.”

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.