NEW YORK (Reuters) – A Czech financier based in the Bahamas was indicted on charges of stealing $182 million from 15 investment funds run by Omega Advisors Inc., a New York-based hedge fund adviser, Manhattan’s district attorney said Thursday.
DA Robert Morgenthau charged 39-year-old Viktor Kozeny, who resides in Lyford Cay, the Bahamas, with 15 counts of first-degree grand larceny and two counts of first-degree criminal possession of stolen property for thefts that took place between March and June 1998.
The charges are each Class B felonies punishable by up to 25 years in prison.
Investors who lost money from Kozeny’s activities included Columbia University, which lost $15 million, and The Common Fund, a fund for universities and other not-for-profits, which lost $4.5 million, Morgenthau said.
Once said to be the Czech Republic’s richest man, Kozeny has faced numerous fraud charges and lawsuits, and is expected to be tried in absentia for stealing hundreds of millions of dollars from his collapsed Harvard investment funds.
“Mr. Kozeny vigorously denies being involved in an effort to defraud any investor,” said his lawyer, Benjamin Brafman, a partner at Brafman & Ross PC, in an interview. “The criminal charges filed against him are entirely without merit.”
Brafman said Kozeny, who holds an Irish passport and is in the Bahamas, “will decide whether to come back to New York to fight these charges or wage his legal battles from abroad.”
Omega is a $3.5 billion hedge fund founded by Leon Cooperman, a former Goldman, Sachs & Co. general partner. Cooperman referred a call to general counsel Dennis Wong, who declined immediate comment.
Columbia spokeswoman Katie Moore said the university is separately joining other investors in a civil action filed in London against Kozeny and his corporate entities.
Big spender
Kozeny has been known as a flamboyant spender who owned two planes and a 165-foot yacht known as “Contemplation,” and at Lyford Cay built a $14 million swimming pool the size of a small lake, Fortune magazine reported in 2000. He was known to spend as much as $21,000 on a dinner in which he sent back an $8,000 bottle of wine because it was “too young,” it said.
Morgenthau said Kozeny promised Omega managers that he would buy on their funds’ behalf “privatization vouchers” and related options from the market and the Azerbaijan government.
The district attorney said that had Kozeny fulfilled his promises, he and Omega investors would have been able to buy a controlling stake in the State Oil Co. of the Azerbaijani Republic, or SOCAR, were the country to sell it.
People familiar with the matter described Kozeny’s role as that of a promoter or dealmaker.
Instead, Morgenthau said, Kozeny used $95 million of Omega’s funds to buy out his own position in the vouchers and options, for a profit of $93 million, and stole an additional $14 million for his personal use. Morgenthau is investigating where the other $73 million went.
The district attorney also said Kozeny used an additional $3 million to buy luxury home furnishings and other items for his homes in Lyford Cay and in Aspen, Colo. He paid $19.7 million for the latter, a 15,000-square-foot chalet, according to published reports.
Brafman rejected Morgenthau’s charges.
“Omega, which is indeed very sophisticated, conducted its own due diligence before investing any money and knew exactly what its funds would be used for,” he said. “It got exactly what it bargained for.”
Morgenthau thanked Switzerland and Isle of Jersey authorities for their help in the case, saying “gathering evidence in a multi-national fraud is difficult.”
