Kozeny's pilot at one time seems to have been Wolfgang Bohringer.
Wolfgang was probably Mohamed Atta's best friend in the years running up to 9/11.
Kozeny has been linked to:
- George Mitchell Jr.
- Frederic Bourke
- Richard S. Braddock
- Wolfgang Bohringer
- Natalie Cole
- Michael D. Dingman
- Jitka Chvatik
- Boris Vostry
- Juraj Široký
- John Sununu
- Thomas P. Stafford
- Benjamin Brafman
- Clayton Lewis
- Leon G. Cooperman
- Shafik Gabr
- Daniel J. Arbess
- Vaclav Wallis
- Petr Cermak
- Aaron Fleck
- Hans Bodmer
- John Pulley
- Christine Rastas
- Richard L. Friedman
- Frantisek Stehlik
- Marlan Orvil Scully
Date of Birth: Jun. 28, 1963
Height: 6' 2"
1979 he emigrated with his parents to Munich.
In 1982 Kozeny had an invitation to study at the University of New Mexico from physicist Marlan Scully, whom the young Czech had approached after a lecture in Munich.
Kozeny attended Harvard.
Around this period may have some connection with Karl Koecher.
Kozeny was expelled from the Spee Club in 1985. The first expulsion in the clubs history.
Kozeny was once investigated by the FBI in the 1980s
He may have graduated with an economics or a business degree around 1989.
Has trouble with police in New York in 1989 over stolen credit cards and moves to England
Lived in Boston from 1990 - 1992. Also in the Czech Republic during this time.
In October 1991 he founded Harvard Capital & Consulting. Harvard was endorsed in Czech advertisements by singer Helena Vondrackova, javelin thrower Jan Zelezny and the singer Bara Basiková.
Harvard would collapse under suspicious circumstances and many investors lost money. They claim that Kozeny embezzled the money but Kozeny claims it was partner Boris Vostry who stole it.
Moved to the Bahamas in 1994
Received Irish citizenship in 1995
Between 1994 and 1997 Kozeny turned his attention to Azerbaijan. He collected over $400 million from investors looking to benefit from privatisations in Azerbaijan. However the privatisations never happened. Kozeny failed to return the money.
In 2005 it was revealed in Bahamian court that Kozeny had some eight to 13 passports from countries including Venezuela and Brazil, as well as a pilot's license.
Viktor Kozeny who is known internationally as the Pirate of Prague was once the darling of the ruling New National Party (NNP) government of Prime Minister Dr. Keith Mitchell. Kozeny promised to transform the marina at the Lagoon for the administration by pouring millions of dollars into a project that would have seen the remains of Butler House, once used as the office of late marxist leader Maurice Bishop, upgraded into a five-star hotel.He threw expensive parties on board his luxury yacht for NNP government officials and was able to land a diplomatic passport from Grenada to travel around the world. The Pirate of Prague often made his private jet available to Prime Minister Mitchell to take-off on overseas trip sometimes as far away as in Europe.
Kozeny is a citizen of Venezuela.
He said he received two letters from officials of Grenada, which said Kozeny was appointed as an honorary consul to the Bahamas for Grenada. Cumberbatch presented the court with a letter from the Minister of Foreign Affairs in Grenada, which stated that Kozeny was appointed to the office on September 28, 1998 and was recalled on December 26, 1999. Cumberbatch also presented a letter from the director of financial intelligence in Grenada, which also confirmed that Kozeny had been an honorary ambassador for that country and had been in possession of a diplomatic passport. According to Cumberbatch, the letter stated that Kozeny’s passport was seized in 2000 and his diplomatic status was revoked in 2003.
Kozeny is being represented by Philip "Brave" Davis, but has other high-profile attorneys like Brian Moree on his legal team.
VIKTOR KOZENY, the Czech businessman who paid £12.5 million for a six-storey London property, has reduced it to a wreck and had it "repossessed" by the Grosvenor Estate.
Mr Kozeny has never spent a night in the Georgian house in Eaton Square he bought from the composer Lord Lloyd-Webber and his wife in 1998. It was then the most expensive terrace house in Britain.
To the dismay of its former owners, however, Mr Kozeny has gutted the interior of the Grade II-listed building, in an effort - now abandoned - to convert it into a more modern "New York-style" home.
He first became known to the British public in 1997 when he paid more than £13,000 for a meal for three at Le Gavroche, the Mayfair restaurant. The bill included £5,000 for a bottle of Burgundy that he gave to kitchen staff after deciding that it was "too young".
His purchase of the house in Eaton Square also won headlines. Builders soon began ripping out the interior but work stopped two years ago, leaving the house a shadow of the elegant building that the Lloyd-Webbers vacated.
Wooden shutters block the ground-floor windows and tatty cardboard is spread over the basement windows at one of the most desirable addresses in the capital. The 8in brass door knocker has been removed or stolen, and security guards have moved in to deter squatters.
The interior of the house is, apparently, even worse. One visitor said: "Since removing the floors, he has needed iron girders just to hold the walls up. It's a complete dump."
The six-bedroom six-bathroom property, designed by the interior decorator Robert Kime, would have been the house of most people's dreams. It had a magnificent indoor pool, a stunning atrium and a conservatory leading to two mews houses.
Mr Kozeny, however, decided that it was not his style. He ripped up the marble floors, stripped the walls and tore out the pool, bathrooms and fittings, and planned to build a nuclear bunker.
Richard Slowe, his solicitor, said that the Eaton Square house had been intended as a family home but Mr Kozeny had separated from, and was later divorced from, his third wife, Ludka, and he now lived in the Bahamas.
This weekend Grosvenor Ltd, the property company owned by the Duke of Westminster, one of Britain's richest men, which owns the freehold, confirmed that it had bought back the property, which has been resold to a unidentified buyer. A spokesman said: "We were in a position where we could negotiate terms to recover the lease."
It is alleged that Mr Kozeny had breached the terms of his lease. Local estate agents understand that the house fetched just £6 million, less than half its value in 1998.
Lady Lloyd-Webber said this weekend that she and her husband had lived next door to their former house for nearly a year in a rented property while they were having another house renovated. "We saw all our marble and bathrooms and something like 40 doors in a skip. It was a lovely home and one has to be sad at the complete waste of money."
The irony is that if Mr Kozeny had left the property as it was he would have made a handsome profit. Houses in Eaton Square, the most desirable address in London, have risen sharply in value over the past three years and now fetch up to £20 million.
THE scene is Le Gavroche restaurant in London's Mayfair, last autumn. A frisson of curiosity is excited among the normally imperturbable waiters by a table of three men who, in a place not frequented by the financially fainthearted, are spending serious money.
Two of the smart-suited diners appear to be English. The man who is holding court is a tall, pudgy-faced, blond, loud Central European.
The climax of the lunch, for the waiters at least, comes when the host sends back a [pounds sterling]5,000 bottle of French wine, complaining that it is 'too young'. The kitchen staff should drink it, he says grandly.
At the end of the meal the bill comes to [pounds sterling]13,091.20. The name on the credit card offered for payment is Viktor Kozeny.
A few weeks later, Kozeny returned to the restaurant and spent [pounds sterling]8,000. His next act was to buy, for the full [pounds sterling]12.5 million asking price, composer Andrew Lloyd Webber's six-storey family home in Eaton Square, Belgravia.
A nuclear bunker was constructed at the back. Then earlier this month Kozeny applied for planning permission to install bullet-proof glass in the windows. The previous owner has his critics, but Kozeny's are obviously more violent.
So who is Viktor Kozeny? After all, the man has shrouded even his personal history in multiple layers of obfuscation.
Our investigations have taken us from Prague to the United States. We have spoken to former wives, angry husbands, ex-business associates, members of his family and his 'victims'. We have seen a secret intelligence dossier on the 'Pirate of Prague', drawing on FBI material and held on file by the Czech government.
Our investigation reveals that when Kozeny left Prague in 1994, he had close to [pounds sterling]1 billion in his many bank accounts a fortune made on the back of an elaborate series of lies and half-truths which have hit the pockets of some of the poorest and most gullible of his compatriots, as well as some of the finest scientists in the United States.
The details that have been uncovered suggest that Viktor Kozeny is undoubtedly one of the most colourful con-men to land on these shores.
HE DOES have one supporter.
Helena Stehlikova, 81 and recently widowed, is Kozeny's maternal grandmother. According to one former business associate, she is 'the only person who actually likes Viktor'. And Viktor treats her well.
Pirate of Prague Invokes Napoleon, Mandela as He Denies Fraud By David Glovin - October 1, 2008 00:01 EDT
Oct. 1 (Bloomberg) -- Perched barefoot at a bamboo desk in his bedroom in the Bahamas, Viktor Kozeny spends 12 hours a day at his computer.
He writes to the lawyers who are battling his extradition to the U.S. on charges of bribery, helps map strategy in a London lawsuit brought by former investors and updates his Facebook page with ideas for inventions using alternative energy. To relax, he swims in the blue-green waters of the Caribbean that lap onto a beach in his backyard.
The life of a fugitive is tough, Kozeny says during three days of interviews at his $29 million estate in July. ``I feel a little like Napoleon sent to St. Helena, the 45-year-old Czech native says of his life in the Bahamas, which he hasn't left since 1999.
``Havel was jailed, he says of the former Czech president. ``People would have laughed if they saw him as a president. He rattles off the names of other famous figures who've been imprisoned: ``Nelson Mandela. Alexander Solzhenitsyn. Kozeny says he plans to clear his own name and run for the European Parliament by 2014.
Prosecutors would like to thwart Kozeny's political ambitions and send him to jail. New York District Attorney Robert Morgenthau says Kozeny stole $182 million from Americans who invested in his 1998 bid to win control of an oil company in the former Soviet republic of Azerbaijan.
U.S. Attorney Michael Garcia in New York says Kozeny offered millions of dollars in bribes to Azeri leaders to cement the acquisition. Czech prosecutors, meanwhile, are presenting evidence to a court that is trying Kozeny in absentia on charges of embezzling $1.1 billion from mutual funds he established in the early 1990s.
The U.S. came close to extraditing Kozeny: The so-called Pirate of Prague spent 19 months in a maximum security cell in the Bahamas' Fox Hill prison fighting extradition until a Bahamian judge ruled last year that Kozeny wasn't subject to American anti- bribery laws and ordered his release.
Now under a Bahamian court order not to leave the island nation, Kozeny says he's broke. He spends a lot of his time surfing the Internet for research to back his energy project.
``There's the science, there's the litigation, and that's pretty much it, he says, between sips of chilled water in his study.
Like other international fugitives, including the late Robert Vesco or Jacob ``Kobi Alexander, the former chief executive officer of Comverse Technology Inc. who fled to Namibia in 2006 rather than answer U.S. options-backdating charges, Kozeny is paying a price for his freedom.
``They build themselves a golden cage, says Howard Safir, who was chief of operations for the U.S. Marshals Service from 1984 to '90 before becoming New York City police commissioner in '96. Safir led a failed effort in the '80s to extradite financier Marc Rich from Switzerland for tax evasion. Rich, 73, who was never tried, was pardoned by President Bill Clinton in 2001.
``A lot of people end up spending all their money keeping their freedom, says Safir, who's now CEO of security consulting firm SafirRosetti, a unit of New York-based GlobalOptions Group Inc. ``There's constant pressure.
One organization applying pressure on Kozeny is the Washington- based Government Accountability Project, or GAP, a public interest group that defends corporate and government whistle-blowers.
`He Claims Poverty'
Steven Tullberg, a GAP investigator, says he suspects the Czech stashed millions of dollars around the globe and secretly controls millions more through family-run trusts.
``He claims poverty, which makes everyone laugh, Tullberg says. GAP has spent two years tracking hundreds of offshore accounts in Cyprus, Liechtenstein, Grenada and a dozen other tax havens. ``When you try to identify assets, you run up to dead ends, Tullberg says.
International banking laws have loopholes that Kozeny and others like him easily exploit, says Louis Clark, president of GAP, which is lobbying for changes in banking laws.
``Anyone can do it if they have a good memory and they're unscrupulous, says Clark, a lawyer and former Methodist minister. ``Only a very strong government might be able to get to the bottom of what this is all about.
Kozeny's existence today is far less glamorous than the one he led a decade ago, when he spent 13,000 pounds ($22,950) on dinner at London's Le Gavroche and jetted around the world in a private Challenger 601-3R.
Ostracized by Neighbors
His blond hair is thinning and his 6-foot-2-inch (188- centimeter) frame has expanded to 230 pounds (104 kilograms).
Kozeny rarely sees his four daughters from three failed marriages. He lives with his mother and says he's ostracized by some neighbors in Lyford Cay, the exclusive gated community where he resides.
He says he's being persecuted by unidentified U.S. politicians and wrongly accused by Leon Cooperman's Omega Advisors Inc., which manages a $6 billion hedge fund, and American International Group Inc., whose 1999 fraud lawsuit against Kozeny led a U.K. judge to freeze $177 million of his assets. (In September, AIG was taken over by the U.S. government amid financial market turmoil.)
``It's ruined the best, most productive part of my life -- professionally, socially, financially, family life, Kozeny says of the court cases. ``It's a little like being hit by a truck.
Kozeny hopes the recent court rulings against U.S. prosecutors will lead them to dismiss criminal charges. For now, he says, his, his family's and trust assets are depleted, after losses in Russia's 1998 stock market collapse and in Azerbaijan and the Czech Republic.
`An Enormous Hit'
His house, called Turnstar, is pledged to lawyers to cover vast legal fees, and his planes and homes in Aspen and London have been sold. The water in Turnstar's $13 million pool is murky.
``We took an enormous hit in Azerbaijan, Kozeny says. ``Through this litigation, we took another giant hit.
Kozeny denies that he's concealing money. ``There's nothing to hide, he says. Asked what he's lived on for the past nine years, how he's paid an army of lawyers and how his mother, Jitka Chvatik, 68, can afford to spend half the year in Monaco, he says his mother has partially paid his way.
She used money from family trusts of which she is the beneficiary and which was earned legitimately in the Czech Republic.
``There's no pot of gold, he says.
Kozeny, at age 19, moved to the U.S. in 1982 after fleeing communist Czechoslovakia as a teenager. He went to New Mexico to study physics, boarding with a family. He then ran off with the 37- year-old wife, whom he later married. They divorced in 1986.
He attended Harvard University in Cambridge, Massachusetts, and graduated with an economics degree in 1989.
``My goal was to become the best investment banker in the world, Kozeny says.
He joined London-based investment bank Robert Fleming Holdings Ltd. for six months and then returned to Prague, the city of his birth, in March 1990, four months after Vaclav Havel led the Velvet Revolution that overthrew communist rule. With what Kozeny says was $3,000 from his grandfather, he launched a fund company named Harvard Capital & Consulting.
The newly capitalist country had begun issuing vouchers for $35 that its citizens could exchange for shares of companies it was privatizing.
Using a Western-style media campaign, Kozeny convinced a million Czechs to deposit their vouchers with him so he could invest on their behalf. Kozeny's funds amassed enough vouchers to control more than 15 percent of the Prague stock market, with stakes in dozens of Czech companies including bank Komercni Banka AS and brewery Plzensky Prazdroj AS, maker of Pilsner Urquell.
``If you want to call me the architect of privatization, so be it, he says. ``I saw the hidden value.
He says the Harvard funds earned hundreds of millions of dollars through management fees of up to 7 percent and a brokerage fee of 1 percent. He later earned around $50 million through investments in Russia and the Ukraine.
The market value of Kozeny's funds reached about 40 billion Czech koruna (then $1.4 billion) in December 1994, more than 30 times the original value of the vouchers he'd collected.
Czechs who cashed out after the first year made up to 18 times their investment, he says. Hundreds of thousands who waited didn't, and the funds collapsed, leaving them with hundreds of millions of dollars in losses.
In 1994, Kozeny left the country, took Irish citizenship and settled in the Bahamas, where there's no income tax. He says old- guard communists forced him to flee after he challenged their hold on the Czech economy.
``I am absolutely in exile, says Kozeny, who has renounced his Czech citizenship. ``I came here as a result of political pressures.
Czech prosecutors offer another reason for his departure -- and the funds' collapse.
According to 2001 Czech criminal charges, Kozeny and a Harvard director, Boris Vostry, stripped the Harvard funds of assets worth 16 billion koruna by selling them at steep discounts to offshore vehicles they controlled.
Their trial in absentia is the largest white-collar crime case in Czech history, says Pavla Koppova, deputy chief of the Czech Republic's Havana embassy, which oversees the country's relations with the Bahamas. A Czech request for Kozeny's return hasn't been acted upon by Bahamian authorities.
``It's total rubbish, Kozeny says of the case. He acknowledges that he helped friends and partners, including American expatriate Michael Dingman, former president of automated controls maker AlliedSignal Inc., gain control of Czech companies. But he says the asset sales were at market prices and approved by regulators.
He says it was Vostry and an accomplice who made off with much of the money lost by the Czech investment funds. Vostry, who lives in Belize, is charged with fraud and being tried in absentia with Kozeny. Vostry didn't respond to e-mails and phone messages seeking comment.
By 1997, Kozeny was again scouting Eastern Europe for investments when Azerbaijan, a former Soviet republic that had pledged to sell state assets, caught his eye.
The State Oil Co. of the Azerbaijan Republic, or Socar, was up for sale at a price that vastly undervalued its reserves, Kozeny says. He figured he could win control of the company, then sell it in a public offering for billions of dollars.
Kozeny also began talking to investors who could back his project. ``He described how privatization was taking place throughout Eastern Europe, Frederic Bourke, co-founder of handbag maker Dooney & Bourke and one of Kozeny's investors, told a state grand jury in Manhattan in 2002. ``He said it was a unique opportunity.
Foreigners were allowed to buy Azerbaijan's privatization vouchers if they also bought a corresponding number of options from the government.
Kozeny set up British Virgin Islands-registered, Baku-based Oily Rock Group Ltd. to invest. Besides Bourke, he signed on money manager Aaron Fleck and Bourke's friend, former U.S. Senate Majority Leader George Mitchell, a Maine Democrat.
Kozeny also attracted institutions that wanted help buying their own vouchers and options. Among them were units of Omega, which gave Kozeny $126 million, and AIG, the world's biggest insurer, and Columbia University, both of which put up $15 million.
Azerbaijan never sold Socar, and in late 1999 Omega, AIG and Columbia sued Kozeny in London for fraud, claiming he charged them $25 apiece for options that cost him 40 cents.
They said Kozeny used their investments to pay off loans to Russia's Alfa Bank and to a Cyprus-based company he partially controlled, Daventree Ltd., taking millions more for himself.
With losses topping $100 million, Omega and AIG won a U.K. judge's ruling freezing Kozeny's assets. A hearing is scheduled for January.
``We were stolen from, Bourke told the grand jury. ``A hundred million bucks.
Kozeny admits the scheme was crooked, but not in the way the investors claim. In response to the London lawsuit, he said his investors knew he'd agreed to secure the deal by giving Azerbaijan's then president, Heidar Aliyev, and other Azeri leaders a secret two- thirds interest in Socar and millions of dollars in cash that he'd been flying into the country.
Under U.K. law, the investors may lose their case if Kozeny proves they acted unethically by joining his bribery plot.
``All very well knew that the deal was corrupt, says Kozeny, who says he wasn't subject to the U.S. anti-bribery law in 1998. ``Who in their sound mind would otherwise fly $200 million in cash to the world's third-most-corrupt country?
Transparency International ranked Azerbaijan 150th out of 179 nations on its 2007 Corruption Perceptions Index and third from the bottom in 1999. Azerbaijan's U.S. consul general, Elin Suleymanov, denies wrongdoing by the government in the deal.
Still, Kozeny denies stealing his investors' money. He says the options his investors were buying for $25 apiece were coming from the Azeri leaders' personal stock and the investors knew their cash served as payoffs. Money from the deal went into the Azeris' pockets, not his, he says.
``I strongly believe that right is on my side, Kozeny says.
Kozeny's problems mounted. After the London lawsuit, he was charged in 2001 in the Czech Republic over the Harvard funds' collapse. Manhattan prosecutors in 2003 filed charges accusing him of stealing from U.S. investors in the Socar deal. Federal prosecutors brought the bribery case in 2005.
Kozeny has also been ensnared in creditor lawsuits in Colorado, New York and Cyprus.
While a U.K. judge called Kozeny's account of the Socar bribery ``colorful, part of it has been proven true.
Thomas Farrell, who was Kozeny's American aide, pleaded guilty to conspiracy and bribe-paying in 2003, as did Clayton Lewis, the Omega executive who oversaw the firm's investments, in 2004. Kozeny's Swiss lawyer, Hans Bodmer, pleaded guilty to a money- laundering conspiracy in 2004.
All three are cooperating with U.S. prosecutors. They've yet to be sentenced. In a twist, the U.S. also accused Bourke, 61, of joining Kozeny's bribery scheme.
Bourke and other investors deny knowing of bribes. ``We did our due diligence, and it didn't indicate that there was any wrongdoing, Fleck, 87, says.
`Shocked' at 'Betrayal'
Omega said the firm wasn't aware the Lewis had agreed to pay bribes. ``We were shocked and dismayed at Lewis's betrayal, Omega said in a statement. The firm paid a $500,000 fine to the U.S. government last year.
Mitchell's executive assistant, Ann Ungar, says the former senator had no knowledge of secret payments.
AIG spokesman Michael Arcaro declined to comment for this story, as did Bodmer, Bourke, Farrell and Lewis.
GAP investigators, whose Washington office is filled with flowcharts and files that track the various arms of Kozeny's companies, say their investigation is being bankrolled by Bourke.
The handbag entrepreneur, in New York criminal court documents from 2005, says it was he who first brought evidence of Kozeny's fraud to Manhattan DA Morgenthau, back in 2002. GAP's Clark and Tullberg say Bourke is a whistle-blower, not a criminal.
Kozeny illustrates how easily con men can hide their holdings, GAP says. He bought hundreds of shell companies, with prepackaged bylaws and nominal boards of directors, in locales where the law bestows secrecy on corporate owners, Tullberg and fellow investigators Kevin Kenety, Jesse Kotarba and Beatrice Edwards say.
Kozeny would transfer assets between companies, pledge one company's holdings to guarantee a loan to another or put one firm under another's control, GAP says.
Everything Kozeny owned -- his homes, aircraft and even his telephones -- was held in the name of private companies such as Grenada-based Blue Lagoon Real Estate, Turks and Caicos Islands- based Landlocked Shipping and Cyprus-based Harms Holding.
That made the assets unreachable by creditors, the investigators say. ``The systems he used are astonishing in their impenetrability, Tullberg says.
On a Friday in July, Kozeny is behind the wheel of his brown 2005 Ford Mustang, the air conditioning blasting, to show a visitor his former home: Fox Hill prison. The Bahamian jail was criticized by Amnesty International in 2003 for overcrowding and violence.
`Fox Hell' Prison
``We call it Fox Hell, says Paul Moss, Kozeny's lawyer. Cells in the maximum security wing, where Kozeny was held, lack plumbing, ventilation and adequate light, Moss says.
Kozeny says he sometimes spent four straight days inside his cell, which measured 6 feet by 9 feet. He says he contracted pneumonia and nearly died while there. ``You can't imagine the heat, he says.
Fox Hill Superintendent Elliston Rahming says Kozeny was treated humanely. Kozeny was allowed out in the yard daily and had a large electric fan in front of his cell.
``This is not a hotel, Rahming says. ``It is a long walk from Lyford Cay to Fox Hill.
Kozeny passed his days by reading or by writing to his lawyers, penning some 4,000 pages. In his isolation, he began exploring a theory of why prosecutors are after him: Investors in his Socar deal were using some money from U.S. government officials, whose identities he doesn't yet know, he says. He says those officials are using the criminal cases to exact retribution for the deal's collapse.
``It's payback, Kozeny says.
Kozeny also conceived his next business venture while behind Fox Hill's walls. He wants to produce appliances, paint and wallpaper that have microscopic energy converters embedded in them.
Billions of such converters will transform sunlight, heat and vibrations into nanowatts of electricity, which will be conveyed via wireless transmissions to a household ``smart grid. The grid will power coffee makers, washing machines and computers.
He says the nanoconverters could be embedded in highway surfaces, generating power for whole communities. ``Each appliance is going to be a micropower plant, he says.
Lacking a lab, Kozeny says he researches the science behind his plan on the Web sites of Stanford University in Palo Alto, California, and other schools. He sketches out concepts on his Facebook Inc. page on the Internet and hopes to attract corporate partners.
``Physics is my life, he says. ``I know more mathematics and physics than any businessman, and I know more law and business than any scientist.
For now, though, micropower is only a theory, just like Kozeny's allegation that U.S. politicians are behind his troubles. The former Pirate of Prague, hounded and exiled to a gilded cage, has plenty of time to elaborate on them.
``I could be sitting here any number of years, he says.
THE PIRATES OF PRAGUE AN EXILED FUND PRODIGY AND HIS BRASH WALL STREET MENTOR PROMISED TO TEACH CZECH INDUSTRY WESTERN MANAGEMENT METHODS. INSTEAD, INVESTORS LEARNED A PAINFUL LESSON ABOUT THE PERILS OF EMERGING MARKETS. December 23, 1996
(FORTUNE Magazine) – The next time you consider sailing your small investor dinghy into the tempting but turbulent waters of an emerging market, keep the following exchange in mind: When FORTUNE asked swashbuckling financier Michael D. Dingman--a fellow who says he considers pirates merely misunderstood entrepreneurs--whether he traded on inside knowledge during his recent business adventures in the Czech Republic, he cheerfully replied, "That's probably true." Other investors, he went on to volunteer, "are saying, 'We can't get enough information, so we're going to sell, we're going to go home to bitch and complain.' That's the kind of meat I like to eat."
Remember Dingman? He was the Al Dunlap of the 1980s, a swaggering, make-no-apologies, take-no-prisoners turnaround artist who dazzled Wall Street by rescuing a series of companies like Wheelabrator and Signal. A daredevil whose hobby was high-speed auto racing, Dingman later led a then-record $1.2 billion IPO of AlliedSignal's castoffs into the Henley Group, a feat that ultimately made him a multimillionaire but also left a trail of angry shareholders who claim he enriched himself at their expense.
Last fall Dingman, who a few years ago gave up his U.S. citizenship for a passport from the tax-free Bahamas, resurfaced in investing's Wild East. Allied with a controversial young Czech investor (and fellow exile), Viktor Kozeny, he announced a bold scheme to take over and transform a rusty bucket of Czech industrial companies--all without ever leaving his tropical base. Though some in Prague greeted this incursion by Caribbean buccaneers with skepticism, much of the foreign press hailed Dingman--who claimed he was pouring $140 million of his own money into the investments--as a hero, a man who would teach the locals much needed lessons in free-market capitalism and Western management skills. an island breeze blows in prague was Business Week's headline, while London's Financial Times called him a "breath of fresh air."
Instead, as it turned out, this breeze proved an extremely ill wind. After failing to deliver on his promises to import American management and accounting know-how, Dingman recently declared that he was tired of the "hassles" and was bowing out of day-to-day management of his Czech investments. Meanwhile, despite a strong continued rise in the overall Czech stock market over the past 12 months, the value of most of the public companies and mutual funds associated with Kozeny and Dingman has plummeted. Hundreds of investors, ranging from Czech retirees to sophisticated international fund managers, are furious, not to mention considerably poorer.
"Dingman wasn't investing in the Czech Republic," says Harvey Schuster, chairman of the Czech-California Investment company in Prague. "He was ripping off in the Czech Republic." That may be too strong. Dingman himself hasn't been charged with breaking any laws. And as a man who's used to suffering slings and arrows in pursuit of outrageous fortunes, he characteristically dismisses any such criticism as sour grapes.
But FORTUNE has learned that last summer the Czech Finance Ministry quietly fined Kozeny's fund management company for a long laundry list of financial offenses at one of the two dozen mutual funds he ran. Some $30 million of the fund's $100 million in assets was frittered away in inflated fees and illegal transactions, according to a copy of the unpublicized ministry ruling obtained by FORTUNE. (Kozeny paid the fine and agreed to pay $6.8 million in restitution.) At the very least, it seems, Dingman, who sits on the board of Ford Motor Co. and formerly was on the board at Time Inc., FORTUNE's publisher, could be accused of keeping some questionable company in his alliance with Kozeny.
Indeed, few have prospered more from exploiting the lax regulatory standards of Eastern Europe's still-emerging financial markets than Viktor Kozeny. After emigrating to the U.S. as a teenager, he was virtually penniless when he returned to Prague in 1990 at the age of 27. Yet in just four years, armed with only an economics degree from Harvard and a short stint working at the London fund manager Robert Fleming, Kozeny transformed himself into one of his country's most celebrated fund managers, with a personal fortune estimated at $200 million.
His main chance: a massive privatization program, launched by the government, that centered on offering to every adult citizen vouchers that would later become shares in publicly traded companies. After a generation of Communist rule, few Czechs had much interest in these pieces of paper--or any idea of what to do with them--until Kozeny's company, Harvard Capital & Consulting, named after his alma mater, stepped in.
Drawing on his experience in the U.S., Kozeny used hard-sell television commercials, a print campaign, and even girls in short shorts to sell his countrymen on two things: the value of creating closed-end mutual funds, whose prices trade on the stock market, and--more important--the value of handing their initial bundle of vouchers over to Harvard. The lure was an outrageous promise. Kozeny pledged that every person who entrusted him with vouchers would, within a year and a day, earn back at least ten times that initial investment. Over a few months in 1992, more than 800,000 people flocked to Kozeny's offices and received, in exchange for a coupon book initially valued at about $37, 20 shares of one of Harvard's funds.
If the market had turned down, of course, Kozeny would have been utterly unable to deliver on his pledge--which is why such promises are illegal under U.S. securities law. And even in the frontier atmosphere of Prague, where no such ban was in effect, Kozeny's reckless opportunism raised official eyebrows. "I was afraid, his behavior was so nonstandard," recalls Tomas Jezek, now head of the Prague stock exchange but at the time the minister of privatization. "He promised something he did not possess."
Luckily for Kozeny, when the Prague stock market began trading in September 1993, share prices headed skyward--making the young stock tout an instant golden boy. Within days those $37 coupon books were worth some $675. Kozeny then proceeded to add to his personal fortune by charging his happy if clueless investors a hefty fee for setting up the funds and another fee for managing them. In the first year of stock market trading, calculates Pavel Travnicek, who was financial director of Harvard Capital until 1995, Kozeny collected $45 million in fees on funds with total assets of $1 billion. But who was counting? By then the Harvard "miracle" had made Kozeny a national celebrity, and his funds had started attracting investors from big Western European institutional investors, including Credit Suisse's Central European fund and at least two London fund managers, Regent Kingpin and Buchanan Partners.
Around this time, things took a weird twist as Kozeny became embroiled in a bizarre case involving an agent of the state secret police. The agent, Vaclav Wallis, was arrested in December 1992 for selling Kozeny secret government documents. Kozeny claimed he was being blackmailed but eventually found himself investigated for his own role in the spy scandal. Although Kozeny was never charged in the case and today claims he was trying to trap Wallis in a government sting operation, he took steps to distance himself from his native country. He sold control of Harvard Capital to a shelf company in the Netherlands Antilles owned by his mother. He obtained an Irish passport. Then in 1994 he moved with his spouse and their two children to Lyford Cay, a wealthy beachfront enclave in the Bahamas where his neighbors included the actor Sean Connery, fund maestro John Templeton--and Michael Dingman.
When FORTUNE first caught up with Dingman and Kozeny last May at the exclusive Lyford Cay Club, the two were still brimming with optimism about their plans. They had met a year earlier at a dinner party and, despite their age gap--Dingman is 65, and Kozeny's now 33--quickly formed a strong bond. "I see myself in Viktor, Dingman said proudly. As he entertained on his yacht, Dingman enthusiastically laid out a picture of the Czech Republic as ripe for the kind of restructuring no one knew better than he how to deliver. "It's like a country that has gone through bankruptcy, he said, "and all of a sudden there is a Monopoly game created.
To play this potentially lucrative new game, as Dingman explained it, he and Kozeny had, after months of exploratory talks, begun cooperating in the summer of 1995. Marrying Kozeny's intimate knowledge of the Czech market with Dingman's capital and turnaround skills, they were working together to take joint positions in targeted companies with solid assets but weak managements and overstaffed payrolls. (They could buy control quietly and cheaply because there was no disclosure law at the time in the Czech Republic, nor were there any requirements for investors to launch a public tender offer when they reached a certain ownership threshold.) Kozeny would formally hand Dingman operational control of the firms, while Dingman promised Viktor a bonus of 10% of any profits he made.
Rising at 3 a.m. in the Bahamas to work the phones, Kozeny embarked on a frenzy of dealmaking under Dingman's direction. By October 1995, Kozeny's Harvard funds and Dingman's Cyprus-based Stratton Group jointly announced that they had secretly purchased large blocs of eight leading Czech industrial companies: a paper mill, a chemical firm, a brewery, a shipping line, a glass company, a pulp mill, an oil exploration company, and the utility that sells heat to Prague apartment dwellers.
Initially the Prague market was buoyed by Dingman's pledge to import top American management talent and by the prospect of a huge new capital injection for these companies. Riding this flush of enthusiasm, Dingman made a trip to Prague in November 1995. Apparently forgetting that he had traded in his citizenship for zero capital gains taxes and a Bahamian passport, he even asked U.S. ambassador Jennone Walker to host a reception for his new venture. "That guy sure has chutzpah, marvels one diplomat, who recalls that the ambassador turned Dingman down cold.
Lost in all the hoopla, though, was the unnerving fact that since he had begun concentrating his formerly broad holdings of 50 Czech blue chips into big bets on these eight firms, the prices of Kozeny's family of mutual funds had been falling, even though the overall Czech market had continued to rise. Why?
On the surface it may have appeared that this was simply another case of a once-hot fund manager making bad portfolio decisions. But as the Czech Finance Ministry judgment privately handed down against Harvard last July and obtained by FORTUNE reveals, the real reason was far more serious: To acquire operating control of the companies targeted with Dingman, Kozeny appeared to be treating his funds as a personal bank account.
The judgment found, for instance, that Kozeny sold six blue-chip stocks, including SPT Telecom, one of the cornerstones of the Prague stock market, in a forward-sale deal at a loss of $6.3 million. Bad news for shareholders, to be sure. But what really upset Finance Ministry officials is that when shares in those stocks began trading, the market price they sported should have produced a nearly $10 million gain for Kozeny. Also singled out for skepticism was a $1.5 million loss the fund recorded on the sale of shares in Czech Ocean Shipping, Sepap paper, and Sklo Union Teplice--three of the companies that Dingman and Kozeny later ended up controlling. The clear implication is that Kozeny was selling stock at knockdown prices and letting fund investors take the loss. Shares were shifting "from Viktor's right pocket to his left pocket" is how one executive familiar with the deals puts it.
In perhaps the most egregious violation cited in the Finance Ministry judgment, Kozeny's Harvard Guarantee & Multiple fund parked $11 million with a brokerage firm he owned as a "down payment" on the future purchase of shares. But the stocks were never delivered and the money was never returned, the judgment states. Finally, the government found illegal a fee for nearly $8 million that Kozeny charged his fund shareholders for running splashy advertisements in leading Western magazines (yes, FORTUNE was one of them). Instead, officials concluded, that money should have been covered by the hefty management fees Kozeny was levying.
As a result of these charges, which were never made public, Harvard was fined the maximum amount under Czech law--the equivalent of $37,000. Further, Kozeny agreed to settle the case by paying back to the funds $6.8 million that had been improperly spent for advertising and consulting fees. Kozeny insists Harvard was fined for purely "administrative reasons." As for the charges of trading below market prices, he insists that "we have never done it, and we will never do it. He maintains the trades occurred in an informal "gray market" before formal share trading began, so he couldn't know what the eventual market price would be.
In any event, five months after going public with his partnership with Dingman, Kozeny torpedoed his funds' already sinking share prices by announcing his intention to convert the Harvard mutual fund family into a new industrial holding company. The plan was announced and rammed through--even though Kozeny at the time lacked outright control of Harvard's shares--at a shareholders' meeting called hastily and held in an obscure village near the Austrian border, four hours' drive from Prague. (Asked by FORTUNE why that site had been picked, Kozeny offered the lame excuse that there had been a lack of meeting space in Prague.)
When word filtered back to the capital that the country's leading family of mutual funds was turning itself into an industrial holding company--imagine the reaction if, say, Fidelity one day suddenly announced it was cashing in its diversified investment holdings and turning itself into an industrial giant along the lines of General Electric--pandemonium erupted. Tomas Jezek, who had just taken over as head of the stock exchange, issued a public warning to "avoid these companies, cut them off and push them to the margin of society." Investors stampeded to the exits, and Harvard Dividend shares slumped 22% in a single week.
The shares might have fallen even lower but for the fact that there was at least one person buying them: Viktor Kozeny. "It was really funny because we made a lot of money off that," Kozeny recalled of the rout of Harvard's share price. He told FORTUNE in May that he acquired 51% of the funds' shares as the price fell.
That cleared the decks for Kozeny and Dingman's final maneuver last July. First, all the Harvard funds, which by then had been transformed into holding companies, were merged into a single entity called Harvard Industrial Holding. Then Harvard was merged with Sklo Union Teplice, a holding company that Dingman and Kozeny controlled. That company was then merged with portions of Dingman's investment vehicle, Stratton, to form yet another holding company, called Daventree Ltd., whose board's roster, in addition to Dingman and Kozeny, includes such luminaries as former White House chief of staff John Sununu and former U.S. astronaut Thomas P. Stafford. The investors in Kozeny's funds now became indirect holders of paper in this Cyprus-based company, which is beyond the scrutiny of Czech authorities and shareholders, and has not published any accounts. Daventree shares aren't publicly traded, although Kozeny has promised to seek a listing for them in London or New York.
If he does, it's highly unlikely that any of the Harvard funds' original investors will be clamoring to get a piece of the action. Since last December, Harvard's main fund, now a holding company, has lost 83% of its value. The other funds have taken similar falls. Frantisek Hapka, a 79-year-old invalid in the Moravian town of Loucka, saw his life savings shrivel from nearly $2,000 to just over $180 today. "If I could walk, I'd march on the Bahamas," he says. "I feel like I've been robbed."
As things now stand, however, there's little point in folks like Hapka marching even on Prague. Though the Czech government has taken some steps to tighten up the loopholes exploited by Kozeny, such as requiring disclosure of share stakes above 10% of a company's stock and requiring companies to make tender offers when they reach more than 50%, the Czech Republic still offers nothing like the kind of investor protection standard in most developed markets. When FORTUNE recently asked Vladimir Ezr, director of trading at the Prague stock exchange, who ensures that investors don't get cheated, he replied, "Nobody."
Daniel Arbess, a former White & Case lawyer who had become Dingman's right-hand man in Prague, resigned shortly after the July mergers took place. When asked by FORTUNE if he was upset by the flurry of dealing, he responded as follows: "I was not involved in nor did I have any knowledge of any financial engineering or financial transactions that were undertaken."
For his part, Dingman has told FORTUNE he is quite happy with the profits he has made amid all last spring's and summer's wheeling and dealing. Just how profitable is hard to say, given the veil of secrecy these private offshore firms now enjoy.
But consider the case of Sklo Union Teplice. At the time Dingman and Kozeny's Harvard acquired this Czech company, it was sitting atop a cash hoard worth $57 million, or $13 a share. That alone was at least $1 a share more than the value of the shares in Harvard that Sklo's minority shareholders received when the Bahamian duo took charge. Today those folks are stuck holding shares in Daventree, a private company of uncertain value. Meanwhile, in addition to their control of that pile of cash, Sklo's new owners have raked in another $35 million from the recent sale of a Sklo subsidiary to a Belgian glassmaker. Not that it's easy to track where that money has gone. Since September, Sklo's ownership has been transferred to two other offshore companies, Berio Holdings and Bruker Holdings. "Who knows where the cash is?" asks Vladimir Jaros, chief of research at Wood & Co., a leading Prague brokerage. "It looks like they are taking the assets out of the country. It may already be gone."
Questions also have been raised about whether Dingman really invested all his money when he said he did. He claimed, you will recall, that he was putting $140 million into the Czech economy in the fall of 1995. In fact, the Prague company registry shows that Stratton didn't actually buy many of its industrial holdings until May 30 of this year. Dingman now acknowledges that he used "forward purchase" agreements to buy several of his stakes, but says he still feels he bought the stocks when he signed the agreements, not when the deals were actually executed months later. It was through this device, though, that Kozeny was able to sidestep a Czech market rule prohibiting mutual fund companies from holding more than 20% of any company's stock.
When FORTUNE told Dingman that some investors in Prague accused him of asset stripping, he replied, "Baloney." Asked if he had an interest in any of the offshore companies that now control Sklo Union and its corporate siblings, he replied that he didn't know the answer. "That's the way you do business in that part of the world. It's not the New York Stock Exchange," he says.
No, indeed, as he knows well. On the New York Stock Exchange in the late 1980s, when Dingman made his initial fortune by engineering similarly complex deals, he had to endure pesky complaints over issues such as the $9 million his Henley Group, the spinoff from AlliedSignal, spent reimbursing him for a series of household moves. And on the New York Stock Exchange, unhappy shareholders could sue. When Dingman as CEO of Henley spun off its chemical subsidiaries and then tried to take the new company private the following year, he found himself hauled into court by shareholders who insisted that he had enriched himself at their expense. (He subsequently settled the suits out of court, after upping his offer to buy out the minority shareholders from $80 a share to $90--a price, by the way, that was more than four times what Dingman paid for his own shares in the company.)
Today, though, Dingman appears to have grown just as frustrated with Prague as he did with Wall Street. While various companies he controls still own shares in Daventree, he claims to have turned over all day-to-day control to Kozeny because the strain of regular management proved too taxing. Recalling the fierce opposition his takeovers provoked from entrenched Czech corporate executives, he says, "I just woke up one night and said, I don't want to be in the middle of all this stuff, I've earned my stripes. I've been down that road and it's never-ending."
With Dingman's departure it's now clear that last year's grand promises of importing American management know-how and capital to restructure Czech industry have been vastly overblown. "They haven't given us any support of a technical or financial nature," says Ivo Klimsa, the CEO of pulp producer Biocel, one of the companies still in Daventree's portfolio.
Instead, Dingman appears to be turning his attention to Russia, where he owns a quarter share of a paper mill and where he says he has invested in Renaissance Capital, the firm set up by Boris Jordan, the Russian financial whiz who established CS First Boston in Moscow. It hasn't been smooth sailing there, either.
Dingman has been accused of defaulting on a note to Alliance Cellulose, the Cyprus company that sold him the Russian paper mill. He says that Alliance Cellulose owes him money, and he is considering suing them. Dingman for a time reportedly refused to pay an agreed-on fee to Brunswick Brokerage, the Moscow firm that arranged the sale. "We worked for Dingman for a time and then we resigned, says an executive at Brunswick who asked not to be named. Dingman claims it was a dispute between lawyers that was eventually settled. So it goes in the brave new world of the Old World's emerging markets.
Unwinding a few months ago aboard his yacht, a 115-foot leviathan called the Teel, Dingman interrupted a question about shady dealings in Eastern Europe with a philosophical fugue on pirates, whom he sees as misunderstood entrepreneurs. "I carried the history of pirates up through today," Dingman says, "and found out that pirates were Joe Kennedy and Sam Bronfman. Even in my lifetime, these were considered pirates. I said, there is nothing wrong with that; these countries are changing. You just want to be on the right side of it." Financially, at least, Dingman and Kozeny have wound up on the right side. Just don't expect these particular buccaneers to leave any more of a legacy than that.
AN ISLAND BREEZE BLOWS IN PRAGUE
Michael D. Dingman sits in his bungalow office in the Bahamas, his bare legs propped on a chair and coconut palms swaying outside his window, when a call comes in from Prague. The lanky 64-year-old picks up the phone, turns to his young partner, who is dressed, like Dingman, in khaki shorts. "Viktor," he asks, "do we have it under control or not?" Red-haired and ruddy from the tropical sun, Viktor Kozeny, 32, nods reassuringly. "My people have the proxies," he answers in a heavy Czech accent.
Kozeny, a controversial, self-exiled Czech money manager, turns out to be right. Four days later, on Nov. 21, Eastern Europe's first corporate proxy fight since the fall of communism ends in victory for this pair of superrich investors. In a bitter battle with a Swedish paper company, Kozeny and Dingman--the former president of AlliedSignal Inc.--have taken control of Sepap, a $300 million paper producer that's one of the privatized gems of Czech industry.
SLASHER? The Dingman-Kozeny victory was a jolting lesson in the ways of Wall Street for East European managers. After winning 57% of the votes, Dingman's lieutenants instantly removed Sepap's top five executives. CEO Tomas Sabatka was clearly shocked. Three days earlier, he had mentioned "stories about Wall Street sharks" but declared that Dingman wasn't one of them.
Whether Dingman qualifies as one depends on whom you talk to. He's a veteran turnaround expert, widely admired by many U.S. managers for his 30 years of transforming corporate losers into winners. Yet some investors criticize his bewildering financial maneuvers for enriching insiders more than stockholders. Now, Eastern Europe is in for a binge of Dingman-style restructuring, and some Czechs fear he and Kozeny are out to make a fast koruna and will slash and burn--and dump workers--to do it.
From their island stronghold, the pair say the Sepap takeover marks the kickoff of a grand, long-planned strategy. Using stock purchased by Dingman's personal investment vehicle, Stratton Group, and Kozeny's Prague-based financial group, Harvard Capital & Consulting, they intend to take control of other Czech companies, inject Western financial and marketing savvy, and merge them into a powerful conglomerate.
Already, Dingman and Kozeny own stakes in 10 Czech companies, from a glassmaker to the brewer of Pilsner Urquell beer (table, page 58). Partly by buying shares from Kozeny's 30 mutual funds and partly by open-market purchases, Stratton will invest $140 million of Dingman's personal fortune in Czech companies--just for starters, he says. He says he expects to add investment funds from wealthy friends, including corporate raider Ronald O. Perelman.
Despite the misgivings of some Czechs, many of the country's leaders are delighted that cutthroat capitalism may sharpen the edge of their "velvet revolution." Stratton Group "is helping to create a new dynamism," says Czech Economy Minister Karel Dyba. In the Czech Republic, 1,900 companies are now owned by throngs of passive investors--both funds and individuals--who can't make the hard decisions to boost efficiency. That's one reason Czech unemployment is a mere 3%. Industry is ripe for consolidation, "like America at the turn of the century," says Kozeny, who has a bachelor's degree in economics from Harvard University.
Amazingly, Dingman never set foot in the Czech Republic until the end of November, when he traveled to Prague to throw a reception for government and business leaders. But he has a well-grounded partner in Kozeny, who five years ago was a modest Prague financial consultant, living in a one-bedroom attic flat. Today, he's undoubtedly the richest Czech, worth $200 million by one estimate.
That wealth came from an audacious gamble. In 1991, every Czech had the right to buy a $35 book of privatization vouchers, convertible into company shares of their choice. Kozeny, who had advised the Czech government on privatization, was sure that share prices would soar. So he bought advertisements promising a tenfold return in one year to those who paid him a management fee to invest their vouchers, and 820,000 Czechs did so. Trouble was, Kozeny had no money. Only if the bourse boomed could he pay his $250 million obligation. Luckily for him, prices jumped sixtyfold. His mutual funds now control 15% of the Prague stock market.
State investigators smelled a scam--although there wasn't one--and grilled Kozeny repeatedly. Fed up and risking arrest, he left for the Bahamas because of its "low taxes and good weather," he says. Kozeny has purchased a lavish home in a gated community, with a front lawn that slopes to the sea and a Rolls-Royce in the garage.
MR. FIXIT. Back in Prague, 1,000 employees now work for his mutual funds and insurance business. But Kozeny won't be returning to Prague, even though Czech authorities say that he's free to come back with no fear of prosecution. "This is my home now," he says. His neighbors in Lyford Cay, near Nassau, are the rich and famous: actor Sidney Poitier, mutual-fund manager John M. Templeton--and Mike Dingman. Dingman met Kozeny at a dinner party two years ago and says he became intrigued. "He reminded me of myself when I was his age," says Dingman.
At that age, college dropout Dingman had left his bizarre first job--selling flagpoles--and had risen at a Wall Street investment firm. One client was a near-bankrupt industrial hodgepodge called Equity Corp. Dingman moved in, dumped hopeless units, and transformed it into Wheelabrator-Frye, a successful builder of industrial plants. His success as Mr. Fixit later landed him at Henley Group, a trash bin for 35 unwanted AlliedSignal units that became known as "Dingman's dogs." Through a blizzard of makeovers, spin-offs, and buybacks, he salvaged many of them--and grew rich.
Dingman dismisses talk that Henley was an exercise in asset shuffling. Sipping Scotch aboard his elegant new 115-foot yacht, Dingman insists that investors who held Henley shares from its 1986 birth to its 1992 liquidation made fivefold gains and that some strong companies emerged, such as Fisher Scientific, a respected maker of medical equipment.
Following Henley's liquidation, Dingman briefly indulged his fantasy of becoming a professional race-car driver. But after a friend's accident, Dingman's wife Betsy balked, he quit racing, and the couple settled down in the Bahamas. Restless and gregarious, Dingman couldn't retire. Meeting Kozeny seemed like fate. The two men talked endlessly for about a year, Dingman recalls, and gradually forged their East European alliance.
Their partnership makes eminent sense. Mutual funds are restricted by Czech rules from owning more than 20% of a Czech company, but individuals--including foreigners such as Dingman--aren't limited. Kozeny brings Dingman big stakes in companies and intimate knowledge of Czech industry. For his services, Kozeny will get 10% of Dingman's profits.
BUYING CREAM. These island exiles also have a strong partner in Prague: Daniel J. Arbess, an energetic Canadian lawyer who until October was the top global privatization expert of U.S. law firm White & Case. A Prague resident since 1990, he is widely respected. "If Mr. Arbess is engaged in [Stratton], that's good enough for me," says Tomas Jezek, chairman of the Czech Parliament's budget committee. Dingman calls Arbess his "orchestra leader" who will run Stratton on the ground.
Fixing their stable of companies will require all the partners' skill. "This is not a standard turnaround," says Mark Rooney, an American management consultant in Prague. "This is restructuring from the bottom up." He thinks they'll have trouble finding managers from the "short list of good people here." Still, Rooney says Dingman is buying "the cream" of Czech companies.
Dingman thinks that the makeover formula he used in the U.S. will work fine in Prague. First, he'll impose tighter financial discipline. Inventories are kept too high, out of an archaic communist concern for peak production. Companies pay their bills too fast but let customers pay too slowly. Dingman plans to fix these problems, releasing cash to buy new, more efficient equipment.
Image is obviously a problem for Dingman. As the Sepap fight raged, the Prague press suggested Dingman was attempting greenmail--a charge he denies. Yet once Prague meets Mike Dingman, concerns over his style may evaporate. He's a charming team-builder who inspires loyalty--"charismatic," in the view of former Ford President Harold A. "Red" Poling. And he has undeniable strengths: access to capital, lofty connections, and restructuring skill. Czech companies that will be taking orders from the Bahamas may face more shocks, but it's what Eastern Europe needs.By Stewart Toy in Nassau, the Bahamas, and Karen Lowry Miller in Prague
Daniel J. Arbess: What went wrong? January 05, 2000
"With some remorse," Daniel Jay Arbess, 34, was packing in 1995 to return to the New York head office of White & Case - a law firm in the vanguard of privatizing what used to be Czechoslovakia and the Soviet Union. During nearly six years in Eastern Europe, Arbess had founded and headed White & Case's Prague office.
In 1992, he had been named a partner - the youngest in the firm's history: "I'd been involved not only in things which tremendously advanced my career, but I was privileged to have the chance to make a contribution starting with my first four cases: negotiating Tomas BaEa's claim to his shoe empire, privatizing the Hotel Praha, beating back Anheuser Busch's bid to buy the Budweiser name for a mere $5 million, and representing the Czechoslovak government in the privatization of Skoda auto to Volkswagen."
In six countries of Eastern Europe, Arbess had negotiated capital transactions valued at more than five billion dollars. Having drawn up documents in 1991 legitimizing Viktor Kozeny's Harvard Funds - the engine that drove Czechoslovakia's coupon privatization - Dan Arbess wasn't surprised when Michael D. Dingman, Kozeny's new partner (and neighbor in the Bahamas) called him on Sept. 15, 1995. Dingman asked Arbess to stop over in London. Arbess was to fly to New York in a couple of days, but agreed to make time for Dingman.
All that spring and early summer of 1995, Arbess had been wooing the former president of AlliedSignal engineering with the notion of a "tremendous opportunity, mostly in Russia, to take control of privatized assets for five cents on each dollar ... Mike, you have access to the right people to do this and could make a lot of money." What follows is Arbess' account of what many view as his crucial role in post-communist Czech financial history: a turning point that may have provided the economy's greatest chance, its biggest plunder - or both. His words are drawn from a wide-ranging two-hour interview late last year in the Manhattan office of his investment management firm.
Flashback to LONDON: Sept. 17, 1995 "So I sit down with Dingman and Kozeny," Arbess recalls. "And Dingman says: 'I've just spent $140 million buying shares in seven [Czech] companies from Viktor. And Viktor has gone out to other funds and swapped shares of other companies for shares of these companies. ... Between him and me, depending on the company, we own 30 percent to 60 percent of these seven companies.' " This move, says Arbess, "was a way for Kozeny to get around 'The 20 Percent Rule' - the single worst piece of legislation in the whole transition process."
Over the Christmas holidays between 1991 and 1992, the Czech Parliament had passed the Investment Company Act, which said that investment funds could hold at most 20 percent of the shares of other Czech companies. "It eliminated the chance that any fund shareholder could gain control of any company. As a result, IPB [Investicni a Postovni banka] - which I consider an odious force in the whole process - and Komercni [banka] and other institutions set up their own privatization funds and aped Viktor without knowing what they were doing. The result? Your average decent Czech company was now owned by four or five bank investment privatization funds that couldn't work together or work with Kozeny. Their instinct was to stuff the companies with bank loans, many of which turned out to be bad. "This act was the root cause of all the economic problems the Czech Republic has experienced since 1993. It led to passivity, inactivity, corruption."
After Dingman had named the companies - Prazska teplarenska (heating and electricity); Ceska namorni plavba, the Czech merchant marine; Ceskomoravske doly (mining); Sklo Union (glass); Spolana (chemicals); Sepap (pulp and paper) and Biocel (pulp) - he asked Arbess: "Do you want to run the restructuring of these companies and work for us?" In front of Kozeny, Arbess told Dingman: "I will not work for Viktor Kozeny because of his reputation."
In this interview, Arbess elaborated that after Kozeny "had perjured himself in that [Vaclav] Wallis trial [of a former agent of the communist secret police for tk selling information to Kozeny] in 1994 [and moved to the Bahamas]. I sometimes ran into him at conferences abroad. I constantly encouraged Viktor to sort out his legal problems and come back because I felt the country needed what he'd been trying to do." Arbess then told Kozeny: "I admire you. But my reputation means a lot to me and I want it to stay intact. So I will not work directly for you, Viktor. I will do this with you guys, but only if control is exerted by Mike [Dingman]." Says Arbess now: "They told me to draft the voting agreements in a way that Dingman would have control of Kozeny's shares and my role would be to exercise that control for Dingman on the ground." 'I had a dream' He had doubts about Dingman as well as Kozeny, but "I disregarded everything ... because I had a dream.
My dream and passion from the very beginning was to be involved in bringing direct equity capital and Western managerial skills to privatizing enterprises and restructuring them for a market economy. Since 1992 in Prague, this had been my obsession." At the 11th hour, Arbess resigned his coveted partnership at White & Case and unpacked his bags to become chief executive and head of European operations for Dingman's Stratton Investments Group. News of the largest-ever multistake sale of shares by a Czech fund and the biggest restructuring initiative in the region was leaked to the international press on Oct. 23, 1995. Only after that were managers and shareholders of the affected firms notified. Not informing shareholders ahead of time was illegal in the United States, but legal here. "Right off the bat," Arbess says, "what were mysteries started to become doubts and concerns.
In a matter of days, things started to go off in a direction that was different from what I'd expected or hoped. As I'm going into my first meeting with the general manager of Sklo Union, Viktor phones from the Bahamas and fires the guy. "I'd asked Dingman to send me experts in each industry - which he did. My next move was to approach the other shareholders in the companies where we didn't have a majority to win their support. "About those other shareholders, I have nothing good to say. They blocked us. It was the worst of Czech xenophobia; they said 'We're not going to help you. You're not going to get our votes.' Without any understanding of economics or of value, they just wanted to own. So I very quickly started negotiating to sell our shares back to them [the chemical companies to Chemapol, etc. for more than I dreamed we'd ever get, even after we went through the hard work of restructuring. "Whether by original design or frustration with this whole process, Dingman stepped back and Viktor consolidated all the assets, sold the liquid assets out of the shipping company and Sklo Union, funneled the cash offshore. ..."
"Funneled or tunneled?" Arbess is asked. "Whatever you want to call it," he replies. "it was a pile of money. We made a lot of money, but not from doing the work I had thought we were going to do and adding value to the companies. No, it was because the Czechs stopped us and paid us big money to get rid of us. So we took the money and we went. I have no remorse about that. It was better than losing money. ... "I left Dingman and Kozeny in June of 1996 and started my own firm in Prague, Taiga Capital. I went to Russia, took another partner and pursued my strategy there. We acquired a specialty steel company and eventually sold it to a steel operator in Switzerland." Taiga got out of Russia before the ruble burst and the economy crashed in mid-1998.
Not long after Michael M. Weinstein wrote in The New York Times of Jan. 11, 1998, that Arbess "now hobnobs with some of Russia's most powerful businessmen, like [media mogul] Boris Berezovsky, and has grown rich buying dysfunctional companies in former communist countries and turning them into profitable businesses," Arbess co-founded Triton Partners, a New York-based investment management firm that already is handling $1.4 billion of U.S. assets.
Dan and his wife, Marlene, moved from Prague with their small son to New York in October 1996 - a year later than originally planned. The Arbesses have had two more children since then. But he reflects often on his heady days in Prague: "I made a lot of money. From that point of view, it was a great success for me. It gave me the independence to go with my own firm into Russia." "If you knew then what you know now," he is asked, "would you have done what you did - take the money and run?" "I don't characterize what I did as 'take the money and run,' " Arbess answers. "Yes, I made money with Dingman - legitimate money. And I know I had the best of intentions. Whatever else happened between Dingman and Kozeny I had nothing to do with. Whether the deal between them was ever legitimate, whether Dingman actually put any cash down to buy anything from Kozeny, what the arrangements were: I have my own ideas. I believe there was probably no cash transferred. I believe it was all notes and paper, and there was probably a plan to which I was not a party - to consolidate all this stuff and go off in another direction. "But in the universe I was a part of, we made an honest effort to bring in top management. Dingman did deliver the people. Had the Czechs responded, I believe the outcome would have been different."
Viktor O'Kozeny Takes Irish Citizenship: August 30, 1995
Viktor Kozeny, the controversial Czech businessman who has been living in exile for nearly two years while undergoing criminal investigation, has acquired an Irish passport and is planning to relocate his corporate empire to the Emerald Isle.
Kozeny is president of Harvard Capital & Consulting (HC&C). The parent company and its subsidiaries wield power over 10 percent of the available stocks in the Czech Republic. Kozeny has been running his empire from Switzerland and the Bahamas since early 1994.
Sources close to Kozeny said that he plans the move to Ireland because time and distance have started to take their toll on business operations.
"He has to get up terribly early to issue orders," said Frantisek Stehlik, Kozeny's grandfather.
"He would like to coordinate [his companies] on site or from as close as possible," said Kozeny's attorney Jiri Teryngel. "It proved rather impractical from such a long distance."
During an Aug. 23 interview at HC&C's headquarters, company officials were struggling to restore communication with their boss after it was lost in a thunderstorm that was sweeping through the Bahamas.
Kozeny, who was suspected of bribery and buying state secrets from an intelligence officer, left the country amid controversy. Police ended their probe July 14 after investigators concluded that there was no evidence that Kozeny acted illegally. He has been cleared of any wrongdoing in the Czech investigation and could return to the country without threat of criminal prosecution. Teryngel said Kozeny chose Ireland partly for tax purposes.
There was no word as to when Kozeny plans the move.
Kozeny has effectively lost his Czech citizenship by obtaining an Irish passport, said Katerina Guluskinova, head of the state citizenship and registry department at the Czech Interior Ministry.
"If a Czech citizen acquires a foreign state citizenship at his own request after Jan. 1, 1993, he automatically stops being a citizen of the Czech Republic," she said.
Speaking to the business weekly The Economist, Kozeny recently said he is trying to attract Western investors through appearances in London and Dublin. He also talked of a fund that would enable Czechs to invest in Western European equities and diversify into emerging markets and shipping.
One foreign investor who recently bought into Kozeny's empire is Sir John Templeton - a prestigious pioneer in global fund management. Templeton recently acquired a significant $5 million share in the HC&C's investment funds.
The Economist described Kozeny as "gushing about investing in the Templeton way" - a conservative form of investment. This approach, however, appears to conflict with Kozeny's latest plans - mentioned in the magazine article - to set up a "leveraged buyout boutique." The plan would use methods similar to those used in aggressive, hostile takeovers of companies.
Frantisek Manak, a member of the board of directors at HC&C, said he knows nothing of plans to set up such a program, but said that kind of business could suit Harvard. "I can see this [being] a successful business."
He Gazes Out From The Pages Of Fortune, Forbes and Business Week. Viktor Kozeny is advertising the company he owns--Harvard Capital & Consulting. The firm invests in the emerging markets of the Czech and Slovak republics, and Kozeny evokes an image of thoughtfulness and prudence. The trouble is that Kozeny, who pitches "Old Tradition" and "New Thinking," is 82 years old. And even in the one country where he is a household name --his native Czech Republic-no one quite seems to know who this fellow is.
To some, Kozeny is a certified hero of the capitalist revolution sweeping the former Soviet bloc: he's an ambitious, smart young man who returned to his homeland to play a critical role in the economic transformation of his country. By luck, pluck and design, he made a sudden killing and accumulated enormous power along the way. To be sure, Kozeny's company-which today owns roughly 10 percent of the Czech stock market-wields tremendous influence in the most well run of all the former communist countries. Yet today, Kozeny lives in the offshore banking haven of the Bahamas, in self-imposed exile. Last week the Czech Republic government confirmed that if he again sets foot in his native country, Kozeny could be arrested in connection with a scandal over secret police files.
Viktor Kozeny's painful history with his home country started in 1980. He was a year-old handball player on a trip to France when his mother and stepfather sold their country cottage for a beat-up Fiat and defected from communist Czechoslovakia. Kozeny joined his parents in Germany. Within two years he moved to the United States to study at Harvard. In 1989 he headed to London, where he had signed on as an investment banker at the venerable firm of Robert Fleming. There he watched as the peaceful Velvet Revolution unfolded in his native Czechoslovakia. Convinced there was money to be made, he left the bank and returned home.
In Prague, armed only with an Italian suit and a few thousand dollars, Kozeny saw his future. The radical scheme of the then finance minister Vaclav Klaus to privatize the state-run economy could make the right people rich. Kozeny was one of the few Czech speakers with Western financial savvy. He set up a consulting company and won contracts to value the government assets. "Basically the bureaucrats were lazy, so they gave the reports to us to write," says Kozeny.
The Czechs were preparing to transform their economy almost overnight. The government had decided to offer voucher books to every citizen for the equivalent of about $85. When privatization took place, the vouchers could then be exchanged for shares in companies to be traded on the newly formed Prague stock market. Klaus, a free marketeer whose idols include Margaret Thatcher, was finance minister at the time. He was also running for prime minister in the 1992 elections. And his name was on the voucher books. "Every book was an invitation to vote for his party," recalls former Czech prime minister Petr Pithart.
But Klaus had a problem. The average Czech thought the privatization scheme was "just another tax the government wanted to collect," says Kozeny. A government TV ad campaign promoting the plan did little to stir interest. Suddenly, with the election looming, the prospect of a failure was real. That's when Viktor Kozeny stepped in. The Harvard Funds made a very simple, but risky, offer: let us invest your vouchers in stocks. In a year's time, we will pay 10 times the initial purchase price of the vouchers to anyone who wants to cash out. That way, Kozeny didn't have to pay any money up front. Kozeny reckoned the Czech government was effectively auctioning off the country - billions of dollars worth of property-for $850 million, and he wanted to cash in. "There wasn't a decent company on the Frankfurt Stock Exchange you could have for that money," he says.
The voucher books poured in, and today his funds own $1 billion worth of stock in Czech companies. Klaus won the election, and Kozeny is now said to be worth $200 million. The government was relieved--but "we were also very worried," says Tomas Jezek, who ran the privatization pro-gram. This wasn't, after all, Goldman Sachs saying it would make good on the vouchers. That's why, at the moment of his triumph, the questions about Kozeny began to mount. Kozeny wasn't required to disclose whether he had the money to buy out "all those goat farmers who gave him the vouchers," as one Western investment banker puts it. But the possibility of massive defaults by Harvard gave the new government vertigo. It asked Kozeny to show whether he had enough assets, but he refused. Klaus then commissioned Wall Street's pre-eminent private detectives, Kroll Associates, to root out every corner of Kozeny's history. And the Kroll report remains one of Prague's most tightly held documents.
Kozeny, as it turned out, kept his promise--the vouchers were worth exactly what Kozeny said they'd be valued at after the first year. But the speculation about how Kozeny had pulled it off intensified. Kozeny, it was rumored, was a tool of the CIA, which got a big Czech bank to back him. A leading opposition politician in Prague recently told NEWSWEEK that Kozeny was laundering drug money--fronting for "the Colombian narco-mafia." The wild charges have never been substantiated. However, Kozeny had become a lightning rod. Today he dismisses it all as "jealousy and provincialism" and insists that his firm bore the risk he had taken on -roughly $800 million in vouchers --by itself. Still, Kozeny became more of a target as his influence grew, and for that he had only himself to blame. From the start, Kozeny hired a number of former employees of the secret police under the communist regime. There was nothing illegal in that. And it made business sense: they were well connected. But so soon after communism's demise, the connections to the former regime only increased suspicions about Kozeny. Then, in mid-1992, he began meeting a Czechoslovak agent named Vaclav Wallis. Wallis says Kozeny offered to pay for secret government files on his firm and on top government officials. Kozeny denies that, claiming he was set up: Wallis threatened to make public secret police files on Kozeny unless Kozeny paid him off.
Whatever the truth -- and Kozeny did eventually report the incident to the police--he relocated to the Bahamas, where he lives now next to one of his idols, the legendary investor John Templeton. These days, Kozeny frequently wakes up at 8 each morning to help run the company he owns half a world away, staying in touch by phone and fax with his firm's managers in Prague. Last week a government prosecutor confirmed to NEWSWEEK "it is possible" that if Kozeny returned home, he could be arrested-possibly in connection with the Wallis affair. That's what keeps him away, Kozeny concedes. "As the father of three children. . . why risk it," he says.
In his high-profile ad campaign, Kozeny still gushes about the Czech Republic. But he admits that he has no idea when he'll go home again. In countries where vast personal wealth is a new phenomenon, sudden success can unleash ferocious resentments, particularly if it acquires the taint of the oppressive past. It's a lesson Viktor Kozeny has now learned-at a very young age.
In a written statement Tuesday, Mr. Kozeny admitted paying money to Mr. Wallis, but he said he did so because he was being blackmailed. Mr. Wallis has not been charged with blackmail.
Mr. Kozeny went on to say he had received a document from Mr. Wallis showing that the post-Communist Czechoslovak Information Service, F.B.I.S., had ordered the "discrediting and later liquidation of my person."
The affair came to the attention of the authorities in December when Mr. Kozeny asked Petr Cermak, then the Interior Minister, to provide him with bodyguards. The two men are acquaintances and squash partners. This week the former minister disclosed that he had granted the request, and had given Mr. Kozeny a pistol to protect himself.
Cermak served as Czech Minister of Interior before the breakup of Czechoslovakia.
Václav Wallis: Getting used to the gallows
Last spring, after a ten-year wait, this former intelligence officer for the Security Information Service (BIS) was finally absolved of an accusation that he had abused his authority as a public servant and endangered state secrecy. The court failed to prove that in 1992 Wallis (58) blackmailed the former Harvard Funds president Viktor Kožený by offering to sell him secret materials about Kožený allegedly collected by the BIS. However, 20 months in detention and persistent doubt had an irreversible influence on his life.
THIS CHEMICAL technology graduate did not continue in his profession for long. Following 1968 he worked at the interior ministry in various positions. During the Cold War he was an intelligence officer concerned with the NATO states, and at the end of the '70s he worked as a spy in the UK. After the regime change in 1989, he went to work for BIS, but after a year and a half he had to leave the service, along with other intelligence "dinosaurs". Then, based on a recommendation by an acquaintance, he tried to get a job as a marketing analyst in Viktor Kožený's Harvard Funds, but never began working there due to his arrest. "I probably played the role of sacrificial lamb. Kožený learned that his activities were under investigation, and in order to avoid prosecution, he was the first to go on the offensive. He ensured that our actions came to light, and the focus of the investigation was shifted from him to me," Wallis explains.
"I lost my job, I was publicly vilified, and I was completely exhausted psychologically," he says of the stressful period, but adds that his family and friends stood by him. "One can even get used to the gallows," he remarks. Despite repeated attempts to find employment, he never lasted long. In most cases "two mysterious gentlemen" appeared after a few days and asked his employers to let him go. He retired at age 55 and tried to supplement his CZK 8,000 per month pension in various ways, but since this September he has once again been unemployed. He spends his weekends with his family at a cottage in southern Bohemia, which they managed to fix up thanks partly to CZK 220,000 that he received as compensation for unjustified imprisonment. And what does he think about the Prague Pirate? "I feel sorry for him. The Czechs probably won't be able to arrest him in the Bahamas, but the Americans whom he defrauded with Azerbaijan stocks will pursue him relentlessly until they catch him," he states with conviction.
Petr Čermák, Czechoslovak Minister of the Interior from June 1990 to June 1992, succeeded Miroslav Macek as Executive Vice-Chairman of the ODS in November 1992, when the latter failed to be re-elected due to his involvement in the KV privatisation scandal (see Chapter Two). Two years later a similar fate befell Čermák himself, this time caused by revelations concerning the free loan to him of a Mercedes by the Czech representatives of Mercedes-Benz, the German Helbig brothers. Čermák drove in the car for almost three years, beginning in 1991. He did not state it in the Parliamentary register of gifts and receipts from outside activities, as required under Law no. 238/1991. Nor did he pay any tax, by which he apparently also broke the law on tax from receipts.
Čermák subsequently submitted an extra statement to his original statement on gifts and receipts, acknowledging the loan of the car, saying that he was not aware that the car counted as an “advantage”, and that he was therefore submitting the new statement “as a token of goodwill”. Chairman of Parliament Milan Uhde (ODS) subsequently concluded that Čermák had broken the conflict of interest law, but did not inform Parliament as the law requires because he decided that only a independent court can definitely judge whether the law has been broken. He did however inform the ODS deputies’ club, which disagreed with him. According to Left Bloc deputy Zdeněk Vorliček, who pursued the affair in Parliament, Uhde’s failure to inform Parliament was connected with the fact that he was “negotiating under very great pressure from the top ranks of the ODS”.
The affair became more confusing through the actions and statements of the ODS leadership. When the daily Český deník first published information that the ODS Party Headquarters was using cars belonging to the Helbig firm, ODS Spokesperson Jana Petrová denied it. Once the affair was in the open, Premier Václav Klaus claimed that the Mercedes had more to do with the financing of a political party than personal gain. However, Helbig has never been entered on the list of ODS sponsors provided in its annual report; nor was the ODS connected with the contractual relation between Helbig and Čermák. Secondly, the Executive Council of the ODS decided to pay the tax if it turned out that Čermák actually owed it - thereby in effect contradicting Klaus’s statement and coming close to admitting Čermák’s guilt. Finally, the whole affair was characterised by Klaus as “a deliberate, long thought-out and prepared campaign of the opposition against the ODS”.
More interesting than the debates surrounding the affair in the winter of 1994 is its background. In particular, a key question is whether Čermák was being rewarded for some service performed for the Helbig brothers or not. Although the specific exchange of a service is not necessary for labelling the loan of the Mercedes as corrupt (the mere understanding that some service could be performed in the future might be sufficient), a few facts are worth mentioning. When the scandal broke (September 1994), the brothers were under investigation in Germany for tax evasion. The daily Telegraf, which is ideologically the closest newspaper to the ODS, reported that according to its German sources the Helbig firm used cars to corrupt various state officials. The following day the Head of the Police Presidium Department of Control and Complaints declared that his department already had information for a year on the corrupt practices and huge tax evasion of the Helbig firm, as well as its connections to the police.
During the course of 1991, when Čermák was still Federal Minister of Interior, the Prague Police (which are subordinate to the Ministry) negotiated the purchase of Mercedes service vehicles from the Helbig brothers under very questionable terms. The police bought twenty-four cars, using a CZK20m subsidy from the Prague City Council and without justifying the purchase. At the same time the Helbigs negotiated the rent of a large police warehouse in Prague 6, whereby CZK30,000 rent (a “disproportionately small amount” according to the SAO report on its audit of the transaction) was “paid” for by free maintenance for the police vehicles, and other services - an extraordinarily vague method of payment. Although actual violations of the law were not uncovered, both the Ministry of Interior Inspectorate and the SAO concluded that the transactions were very disadvantageous for the Prague Police, and thus for the taxpayer.
More significant evidence for a possibly corrupt connection is the following. On 3/9/93 the Parliamentary Defence and Security Committee, of which Čermák was a member, discussed the suspicious contracts between the Prague Police and the Helbig brothers. Although Čermák denied being present, the record of attendance unambiguously proves that he was. Finally, he said nothing to any of the other members of the committee about the Mercedes loaned to him by the Helbigs. It is not known how he voted at the meeting, since no record of individual votes is kept. The committee handed the matter to the SAO.
The extent of contacts between the Helbigs and the Czech political establishment subsequently aroused further interest. First, it emerged that the Helbigs also loaned a Mercedes free to the Mayor of Klatov, Jan Vrána (KDU-ČSL). The contract by which this was carried out specified that Vrána would participate in a campaign to promote the Mercedes brand. In addition, he received the car after a contract was signed for the purchase from Helbig by Klatov Council Technical Services of Mercedes cleaning machines for the town, allegedly for a price which did not reflect their usefulness. Second, the Helbigs also lent Mercedes cars to the Prague Castle police. Finally, Jan Ruml, Čermák’s successor at the Ministry of Interior, also became embroiled in the Helbig affair. In October 1993 he personally visited the Helbig’s legal representative in Prague, at the time when the Interior Ministry Inspectorate was investigating the deal between the Helbigs and the police, and ensured him that neither the Ministry Inspectorate nor the control organs of the Police Presidium would ask for any more information concerning the sale of Mercedes cars to the police. Ruml justified this step by the fact that the SAO was now investigating the case, and also by the fact that the police control organs allegedly overstepped their legal authority in demanding documents from a private firm when no criminal proceedings were taking place. Head of the Ministry Inspectorate J. Kolaja claimed that Ruml ordered him to stop his department’s investigation. Although Ruml denied this, and a report with Kolaja’s signature was produced, two facts suggest that it may have been hurriedly completed. Firstly, the Inspectorate failed even to find out exactly who signed the agreement between the City Council and the police. Secondly, Kolaja was removed from his position immediately after the investigation, joining a growing list of sacked heads of the Ministry Inspectorate. The publication of a photograph of Ruml together with the Helbig brothers caused further embarrassment.
The Helbig-Čermák affair, like almost every other Czech affair, finished in obscure silence, and also in a police fiasco. After the German police issued a warrant for the arrest of the Helbig brothers at the end of November 1994, the Czech police visited the brothers at the Prague showroom in order to arrest them. However, the brothers mysteriously escaped after the police apparently left to telephone their superiors in order to check the legality of the arrest warrant. How it was possible for such incompetence to take place is not known. Leader of the Social Democrat Party Miloš Zeman commented in the following way:
“I wouldn’t blame the police for allowing the representatives of this firm to escape, when they [the police] could have been influenced by information concerning the contacts between the Minister of Interior and this firm.”
According to then member of the Presidium of the Free Democrats (Civic Movement) and former Attorney-General Ludvík Brunner, “It has been confirmed that the Helbig brothers did not invest their sponsoring activities in Petr Čermák when he was still Minister of Interior in vain.”
One of the seventy employees of the Prague showroom who was dismissed after Mercedes-Benz formally withdrew from its contract with the Helbigs said in an interview with ^ Lidové noviny that the Helbigs had debts with many creditors, including the state, and that the firm offered cars as bribes to highly-positioned people in the Czech republic.
Although Čermák failed to be re-elected as Vice-Chairman of the ODS in November 1994, Premier Klaus subsequently took on his services as an adviser. Various large firms attempted to employ him, including ^ Harvard Security and AERO Vodchody, and it was also rumoured that he would take a position in the Parliamentary Defence Committee.
Hall's Pond CayEdit
Another cay, Hall's Pond, was privately owned by notorious Czech financier Viktor Kozeny. Kozeny created a furor when he put heavy construction machinery on the island and began building roads. In 1999, the government of former Prime Minister Hubert Ingraham ordered Kozeny to stop and to restore the island to its original condition. Later, the government issued a "notice of possession," reclaiming Hall's Pond for the park. Today, the cay is slowly regenerating.
Hall's Pond Cay was purchased in the 1990s, for a reputed $1.5 million by notorious Czech financier Viktor Kozeny, who lived in exclusive Lyford Cay in New Providence. Kozeny created a furor when he put construction machinery on the island and began to build roads there.
So vociferous was the outcry that the Bahamian government ordered Kozeny to stop construction and restore the island to its original state. Then, on December 14, 1999, the government issued a "notice of possession" under the Acquisition of Land Act, signed personally by then-Prime Minister Hubert Ingraham, reclaiming Hall's Pond for the Exuma Cays Land and Sea Park. At last word, the government was still negotiating a price for the expropriation and the cay was slowly regenerating itself.
Under interrogation, Ahmad al-Naggar stated that Egyptian Islamic Jihad had raised funds by "renovating old houses in London"
Compiled by the Egyptian defence ministry, the documents provide the most authoritative account yet of the Islamic Jihad organisation and of Al-Zawahiri, whom many suspect was the inspiration behind the September 11 attacks. One of the most important hijackers, Mohammed Atta, was an Egyptian from Cairo. He, too, is suspected of being a member of Al- Zawahiri's organisation. The documents reveal how: Sources of funds of the terrorist network included the sugar trade and sheep rearing in Albania as well as the renovation of old houses in London.
Ahmed al-Naggar, another Islamic Jihad member who was also captured by the Egyptian authorities in 1998, revealed how Bin Laden came to be a key fundraiser for the organisation at an early stage.
"The funding of the organisation came [primarily] through financial support from the Saudi Osama Bin Laden," he told Egyptian state security interrogators. "As well as members of the organisation donating 10% of their salaries, funds were also raised through trade projects such as sugar, raising sheep in Albania, trade in southeast Asia and the project of working on and renovating old houses in London."
VIKTOR KOZENY, the Czech businessman who paid £12.5 million for a six-storey London property, has reduced it to a wreck and had it "repossessed" by the Grosvenor Estate. Mr Kozeny has never spent a night in the Georgian house in Eaton Square he bought from the composer Lord Lloyd-Webber and his wife in 1998. It was then the most expensive terrace house in Britain. To the dismay of its former owners, however, Mr Kozeny has gutted the interior of the Grade II-listed building, in an effort - now abandoned - to convert it into a more modern "New York-style" home.
In a federal indictment announced in October, a Czech-born businessman named Viktor Kozeny was charged with bribing Azerbaijani government officials in an unsuccessful effort to gain control of the state-owned oil company.
Kozeny asked a Chechen mobster for introductions to high-ranking officials in the Azerbaijani government, and the mobster brought him to see Ilham Aliyev, then deputy head of the oil company and son of the president, according an affidavit by a former Kozeny colleague.
Aliyev told Kozeny to see the chairman of an Azerbaijani government committee overseeing the privatization process, the affidavit of Thomas Farrell says.
Farrell testifying that after a courier and a Chechen security officer had been arrested by state authorities, Uncle Ali of the Chechen mafia had managed to schedule a meeting between Kozeny and Ilham Aliyev, the President's son and the Vice President of SOCAR
A lawyer for Kozeny since 2005, Clive Nicholls QC, has also represented Augusto Pinochet, Abdel basset al-Megrahi and members of the Bowe family.
Clive Nicholls's twin brother, Colin, is 40 minutes younger and has a similar practice in the same set, doing mainly extradition and human rights. Both decided that they wanted to do law at the same time, when they were about 14 years old, and were both schoolboys when they joined Gray's Inn. They were both inspired by, among others, Hartley Shawcross - "a star advocate" for whom their father worked as a civil servant during the war.
They both attended Brighton College and then went on to study legal science at Trinity College, Dublin, where their father had retired to. The first divergence was when Clive went to Cambridge, and they met up again to do the Bar exams. The only other time there has been a divergence is when Colin became a QC in 1981, and Clive a year later. Both twins did their pupillage with James Burge at the set when it was called Queen Elizabeth Building. Burge defended Stephen Ward in the case arising from the Profumo incident, and was also, apparently, the model for Rumpole.
The twins became tenants in the set in the late 1950s when the set was known for criminal work and licensing, but they did criminal work, prosecuting and defending, mostly at the Old Bailey. The extradition work started in the 1970s.
As Clive explains: "Extradition has mushroomed, especially since the 1970s, because of the increase in international crime."
The extradition laws dated from the 1870s and the UK had become known as a safe haven for criminals until the law was changed in 1989. The David Shayler and Pinochet cases have raised the awareness of extradition in the public eye, and the Pinochet case has already had academics and other lawyers, including Geoffrey Robertson QC, commenting that it will open the floodgates for extradition requests for other leaders accused of gross violations of human rights.
With other members of the set, the twins have done a series of high-profile cases all over the world. Clive has just completed an anti-trust case involving the US and Japan, and Colin is involved in a case in Italy. They do not go head-to-head for cases, and that included deciding whether they should both apply to be head of chambers in 1994 - in the end, Clive did, and was chosen by the chambers.
Within the set, there is also healthy competition, and the chambers is strict in putting the appropriate procedures and Chinese walls in place if they are on opposing sides. But given the cases that the barristers are working on, it is more than likely that they will read about the cases the other members are dealing with in the press - Alun Jones QC, as well as working on the Pinochet case, acted in the Maxwell case defending Kevin Maxwell, and has written the book on extradition; Stephen Batten QC acted for the former High Court judge Richard Gee, and Alex Cameron recently went to court with his client, Peter Young, a former Morgan Grenfell executive, who attended dressed as a woman.
Kozeny is accused of funneling money into Bush’s first election campaign in order to keep him close to U.S. deals with Azerbaijan and during Bush’s second campaign to prevent his extradition. He also allegedly participated in an Alfa scheme to defraud U.S. investors and companies.
John Pulley, who provided security for Kozeny, took the witness stand yesterday: “He had a yacht, he had an island, he was having a house renovated in London, and he was building in Nassau,” Pulley, a former agent with the Drug Enforcement Administration, testified. “His entourage, when we travelled, was five people.” Early in 1998, Pulley said he and Kozeny flew from the Bahamas to Florida on the Czech’s private jet for a dinner at a restaurant, where Bourke and Mitchell were waiting for them.
Rick Bourke sits in the federal prison in Englewood, Colo., sentenced to a year and a day. Former Washington Post reporter Scott Armstrong, who founded the National Security Archive and chaired the Government Accountability Project, spent years investigating the case. As a senior investigator on the Senate Watergate Committee, Armstrong uncovered the existence of President Richard Nixon’s secret taping system. He knows corruption when he sees it, and considers Bourke a genuine whistle-blower. He summed up the case:
“This elaborate set of frauds that Kozeny was involved in were in essence covered up by the United States government, who chose instead to bring the full weight of their investigative enthusiasm against the whistle-blower. And that just shocks the conscience.”
The Bahamians apparently signed an extradition treaty with the US that went into effect in 1994.
Harvard Funds liquidator is Zdenek Castoral, a Czech prosecutor.
Born on December, 29, 1953 in Kosice, Czechoslovakia. In 1994 he became the vice-president of HC Slovan Harvard Bratislava. Was elected president of this club in 1998 and later also president of the Slovak Ice Hockey Federation, for which position he was re-elected in 2002. Since 2001 he is a member of the Sport Council of the Slovak Olympic Committee. His IIHF career began in 1999 in the Development Committee, since 2002 he his also a member of the Championship Structure Committee. Juraj Siroky was working for the Federal Ministry of Foreign Affairs of former Czechoslovakia in the 80s and was also employed at the Czechoslovakian embassy in Washington, USA.
2 Jul 2007
TYCOON Juraj Široký, president of the Slovak Ice Hockey Association and an alleged sponsor of the ruling party Smer, was a paid agent of the communist secret police - Štátna Bezpečnosť (ŠtB) - from 1979 to 1990, according to a copy of his ŠtB file that was provided to the Slovak media by the Nation's Memory Institute. The file shows that Široký, the 53-year-old businessman who was behind the media company Perex, publisher of the Pravda daily, until 2006, applied for enrollment into the secret police on August 30, 1978.
"I want to be as useful as possible to our socialist regime by actively fighting against internal and external enemies," Široký wrote in his application. One year later he was accepted with a starting monthly salary of 2,300 Czechoslovak crowns, roughly equivalent to Sk28,770 (€853) today. Široký underwent training and in 1985 was sent to work as a clerk at the Czechoslovak embassy in Washington D.C., where he climbed his way up to become the deputy of the "residency" - the ŠtB's local branch in a foreign country. There he was in charge of developing a network of agents and assigning them tasks, which brought him 3,500 Czechoslovak crowns a month, 2,000 crowns more than the average salary and roughly equivalent to Sk43,770 (€1,300) today. "He gradually became familiar with the demanding situation with the US along the lines of political intelligence," ŠtB Lieutenant Colonel Eduard Plexa wrote in Široký's file. "Široký demonstrates exactness and initiative in his work and processed records show increasing quality." Široký, who currently runs 14 different businesses, worked for the secret police's intelligence unit for 11 years. He occasionally received bonuses, the highest being 2,500 Czechoslovak crowns for what the secret police referred to as "the high-quality planning and execution of recruitment," Ivan Petranský, chairman of the Nation's Memory Institute, told the Hospodárske Noviny daily. Široký received a total of 15,000 Czechoslovak crowns in bonuses, which was a considerable amount of money at the time and equivalent to roughly Sk187,600 (€5,560) today.
Široký has responded to reports of his cooperation with the ŠtB by saying that he has not done anything that would violate the principles of decency. "I have several times confirmed for media that I worked for foreign policy service," said Široký. "In every country, the secret police have been and will be part of this service." However, as recently as June 2006, Široký denied having ever worked for the secret police. "I never collaborated or worked as an agent for the ŠtB," Široký said in an interview with Hospodárske Noviny. "I worked in the foreign service as an employee of the Foreign Affairs Ministry. This is all I can say about it." Široký even reported his mother's correspondence with her uncle, Albert Ferdinand, who was living in the US, according to ŠtB files. According to Široký, his mother's brother was the one who made the first contact with their uncle. "I assume that the brother of my mother made contact with the person named above [Ferdinand] based on the prospect of financial gain, when at that time he was getting divorced and living with a younger woman, who presumably forced him to do so," the report says.
According to ŠtB records, Široký wanted to continue working for the secret police even after 1989, when the communist regime collapsed. However, his request was rejected by the interior minister, Ján Langoš, who later founded the Nation's Memory Institute. Langoš died in a car accident in June 2006. The original copy of Široký's file was lost after Langoš's death, leaving the Nation's Memory Institute only with two notarized copies. The copies of the ŠtB file are worth nothing in legal terms, Petranský told Hospodárske Noviny. "Rather, its value is historical," he said. However, the archive of the Czech Interior Ministry in Prague recently told The Slovak Spectator that facts written in the copy of Široký's file can be verified with records that have been found at the headquarters of the secret police in Prague. "In the central archive there must be loads of documents linked to him," Radek Schovánek, researcher with the Security Archive of the Czech Interior Ministry told The Slovak Spectator. "The local unit's correspondence with the Prague centre can show what the particular person was working on."
There are only guesses as to what the current whereabouts of Široký's original file are and whether it actually still exists, but a source who wished to remain anonymous told The Slovak Spectator that the file does still exist. Široký was the co-owner of Harvard Investment Funds, along with Czech businessman Viktor Kožený, who is now living in the Bahamas and is wanted for fraud both in the US and in the Czech Republic. Kožený has accused Široký of laundering and stealing a major part of the funds, coming to more than $100 million, but Široký has repeatedly denied the accusations. Police are taking action based on a complaint filed by Zdeněk Častorál, liquidator of the Harvard Industrial Holding (HPH). "Fifty million dollars from HPH's resources have shown up in Slovakia," Častorál said. Široký denies the accusations. Slovak police are also investigating a money transfer of Czech funds to Slovak firms managed by Druhá Strategická, a company of which Široký is a member of the board of directors. The Anti-Corruption Bureau has started a prosecution on the suspicion of fraud. "We are working on the case and waiting for legal help from several countries," Bureau head Tibor Gašpar said.
Juraj Siroky, a former STB secret police official who now heads VAHOSTAV construction company.
Slovakian media have reported that he has been developing land in Old Fort Bay, Nassau, Bahamas.
Kozeny Resigns as Chairman of HC&C
Victor Kozeny, president of the Harvard Capital and Consulting Company, resigned from his duties as chairman of company's board of directors, being replaced by Ivan Kralik January 18. The daily Cesky Denik reports that Kralik, a lawyer, worked in the office of former president Gustav Husak for 14 years.
Keeping his post as director general of HC&C is Frantisek Stehlik, grandfather of Kozeny, with more than 90 per cent of the company's shares.
Although Kozeny resigned as chairman of the board he is still president of the company and remains one of five members of its board, according to Mr. Vostry, HC&C's vice-president, quoted in the newspaper Mlada Fronta Dnes.
Meanwhile, Kozeny failed to appear for questioning at Prague's Investigation Office, where he was called in connection with an investigation of Vaclav Wallis, a former member of the Federal Information Service.
Kozeny is allegedly ill and being treated abroad. He refuses to specify the country of his treatment but says that he will return by the end of this month. He rejected suggestions that his departure was a way of escaping the interrogation.
"I survived influenza and pneumonia and still I was found to suffer from heart problems," said Kozeny. "I think that it would be ridiculous trying to hide from the police. I was co-operating with the police before Christmas, when I testified before the court in Plzen. "
Kozeny has a permanent residence in Boston, Massachusetts and temporary residence in the Czech Republic.
Kozeny was once an ambassador of Grenada.
Another ambassador of Grenada was Eric E. Resteiner, who was convicted of running a ponzi scheme in 2007 by the SEC, along with his accomplices; Charles G. Dyer, Miles M. Harbur and Voldemar A. Vonstrasdas.
Miles M. Harbur of Jupiter, Fl was once Chief Operating Officer of The Christian Science Publishing Society.
It has been rumoured that Kozeny was introduced to Grenada by a German named Peter Capella.
Kozeny, Grenada and Cuba
Grenada attacks economic doldrums: December 15, 1997
ST. GEORGE'S, Grenada -- One of the most enduring reminders of the 1983 U.S. invasion of Grenada -- the former Marxist regime's bombed-out headquarters overlooking St. George's harbor -- will soon be torn down and replaced with a five-star luxury hotel.
The $140 million undertaking, which includes a 500-berth concrete and fiberglass marina for the super-rich, is being financed by Daventree Ltd., a Bahamas-based holding company controlled by Czech investor Viktor Kozeny.
"People are very excited about this project," says Winston Whyte, managing director of Blue Lagoon Real Estate Corp., which is supervising the effort. "Our marina will accommodate the best of the best. That's why we're planning a 180-room hotel, chateaus and villas coming down to the waterfront. It'll be absolutely beautiful. It'll be like a city on the water."
If the Blue Lagoon project ever comes to pass, it will be a badly needed shot in the arm for this poor Caribbean island -- where tourism is stagnant, the banana industry is in crisis and manufacturing investment almost nonexistent.
"Not a single genuine investor has come into Grenada since June 1995," charges former Prime Minister George Brizan. "There is no confidence and no macroeconomic climate to attract investors. The Mitchell government has no plans or policies, and they're not guided by anything except how to protect and preserve their political power."
Brizan, who now heads the opposition National Democratic Congress, makes no secret of his dislike for the nation's current premier, Dr. Keith Mitchell. In yellow leaflets distributed around the island, Brizan refers to Mitchell as a "Devil Leader" whose New National Party "butchers and crucifies the people."
Mitchell -- a former math professor at Washington's Howard University -- says Brizan is completely wrong. Grenada's GDP will have expanded by 5% in 1997, he said -- with this growth being fueled by Grenadians returning home from the United States, Great Britain and Canada, as well as large infrastructure projects like the $23 million National Stadium Complex and a $75 million Ritz-Carlton that'll boast the country's first 18-hole golf course.
"There is an upbeat mood as far as a willingness of people to take initiative, to do things for themselves," the prime minister said in a recent interview. "We came in on a platform that government is not the best avenue to create opportunities or jobs. I think the message is getting out. People are now getting involved in little businesses, setting up manufacturing and microenterprise activities. The perception of Grenada as a country that's not willing to settle down has certainly changed. I think we're settling down politically, and that is convincing people of the need to invest in this country."
One of the smallest nations in the Western Hemisphere, the 133-square-mile island was discovered by Columbus in 1498 and settled by the French in 1650. After oscillating between French and British rule for 130 years, it was ceded to Great Britain in 1783, finally achieving independence in 1974. Its current population is estimated at 98,000.
Besides being the world's second-largest exporter of nutmegs after Indonesia, Grenada's chief claim to fame is its 1979 Marxist coup that toppled Prime Minister Eric Gairy and brought Maurice Bishop to power, and Bishop's 1983 execution by supporters of Bernard Coard. That led to President Reagan's Oct. 25 invasion, the re-establishment of democracy in Grenada, and Washington's eventual passage of the Caribbean Basin Initiative to stem Communist influence in the region.
Dr. Bob Jordan -- an anatomy professor who has taught at Grenada's St. George's University since 1979 -- remembers the U.S. invasion well.
"Everybody says it was a ploy to get Castro out of this country," recalled the Miami native. "But during the last two weeks [of the regime], our students' and faculty's lives were really threatened. I thought they could easily go the other way, make us hostages and set us up for a real bloodbath."
These days, things are much calmer at St. George's University, and Jordan -- who's also associate dean of admissions -- focuses on more pleasant subjects like the university's aggressive expansion plans, which will pump an estimated $25 million into the Grenadian economy. To an observer, the impeccably neat campus, with its pastel buildings overlooking sparkling blue waters, looks more like an expensive Caribbean resort than a med school.
Yet despite CBI benefits and years of European preferential quotas for its bananas, Grenada is still essentially a Third World country whose per-capita income hovers around $2,300. The UN Development Program lists Grenada 54th in the world, with a human development index of 0.843 -- just ahead of neighboring St. Lucia and St. Vincent but way behind other Caribbean islands such as Barbados, Bahamas, Antigua, Trinidad & Tobago and Dominica.
"With the declining agriculture sector over the past two decades, we have been looking at the service sector -- primarily tourism -- to take up the slack," says Anthony Boatswain, general manager of the Grenada Industrial Development Corp. "I think we could compete with other tourist destinations, unlike manufacturing, where we are regarded as a high-priced producer due to economies of scale."
One way the Mitchell government hopes to attract investors is by turning Grenada into an offshore tax haven, and collecting hefty bank fees on secret accounts.
"We are convinced this is the way to go," said Mitchell. "We are quite aware of the possibility for misuse and money laundering, but we -- like many other countries -- will do everything possible to get the business. Let's face it, bankers and people with lots of money want to diversify. They don't want to concentrate their investments in any particular area. If I had money like them, I'd do the same thing."
Meanwhile, the Grenadian government is quietly resuming its once-close ties with Communist Cuba. Mitchell toured Havana last year as a guest of Cuban President Fidel Castro, and has invited Castro to visit Grenada next February, just before the beginning of the annual Caricom summit to be held there Mar. 2-3.
Despite Washington's unhappiness over the warming of ties between Cuba and its Caribbean neighbors, Mitchell says his position is quite clear.
"Cuba was very helpful to Grenada from 1979 to 1983, particularly in the building of our international airport. That cannot be questioned," he said. "Besides that, it played a very crucial role in the development of our human resources, the education of hundreds of children of very poor parentage who would never have had an opportunity to become doctors and engineers. We are not doing anything behind the scenes, and we are not against anyone's security or national interests."
Gilbert Allen Ziegler, a.k.a. Van Arthur Brink:
Just three years after he declared bankruptcy in Oregon, Gilbert A. Ziegler arrived in this eastern Caribbean island in 1997 on a passport from the Dominion of Melchizedek, an "ecclesiastical state" that apparently exists only on the Internet.
By his own account, Ziegler paid the government to become a Grenadian under its economic citizenship program, changed his name to Van A. Brink--"for private, spiritual reasons, not to hide"--and laid the foundation stone for what he would later claim was a $62-billion offshore banking empire.
That stone was a ruby. Brink used a photograph and appraisal of the gem to help capitalize First International Bank of Grenada Ltd., which offered interest rates of 100% or more.
Within a year, the bank reported assets of $14 billion.
But last month, First International Bank of Grenada came unglued, threatening thousands of depositors--mostly Americans--with the loss of tens of millions of dollars.
The Grenadian government, which was warned about the bank's practices as early as March 1999, took over what's left of it Aug. 1 and has been struggling ever since to untangle a web of sub-banks and affiliated companies. And in late August, local police charged two Canadian businessmen associated with the bank with fraud.
David Marchant, who as publisher of the Miami-based newsletter Offshore Alert has led an 18-month crusade against First Bank, asserts that the bank used new depositors' money to pay impossibly high interest rates to older depositors until all the money was gone.
Brink, who is now reported to be living in Uganda in one of former dictator Idi Amin's residences, has denied that allegation numerous times. He asserted in a series of recent e-mails to depositors and Grenada's special bank investigator that he is "a target of false allegations, character smears, insinuations and innuendo" that he blames on Marchant. He has not been charged with any wrongdoing.
The blond and balding Brink resigned his positions at First Bank nearly a year ago and has served as a consultant to its board since June. He moved to Uganda earlier this year, announcing an ambitious plan to use $40 million from First Bank to help rebuild neighboring Congo.
Grenada's special examiner, Garvey Louison, stated in an Aug. 22 letter to First Bank's directors, consultants and former directors that "many millions of dollars have been transferred [from the bank] to Uganda and assets acquired there. I am also aware that other properties, including land, have been acquired with the use of monies belonging to the bank or its subsidiaries."
Millions more, Louison stated, were transferred from the bank either directly or indirectly to Brink and other directors. "This clearly is a breach of your fiduciary duties at best and at worst a fraudulent misrepresentation," Louison concluded.
Brink's e-mailed response, while pledging his "full cooperation" with Louison's probe, said the letter "seems to be a matter of skulduggery under color of law rather than a forthright attempt to examine anything as relates to the bank's finance." And he asserted that "ample value does exist to meet the obligations to depositors."
The tone and length of his most recent missive were consistent with the 49-year-old banker's earlier public statements. His paid advertisements and pronouncements since he left behind his failed mortgage brokerage in Oregon have been heavily laced with religion and advocacy for the common man, casting First Bank as a rare vehicle to help enrich America's middle class.
Grenadian Finance Minister Anthony Boatswain insisted in an interview late last month that his government, which was warned by a Grenadian auditor that First Bank was in "complete violation" of offshore laws here, had had no proof of wrongdoing by the bank. It was only after a long-delayed audit by a British accountant, he said, that he learned that "the bank was in serious difficulties. Based on that, we had to send someone in to protect whatever is left of the bank."
"It looks bad," added Keith Friday, senior counsel of the government's offshore regulatory agency. "First Bank is a learning experience for us, there's no doubt about that."
Perhaps not surprisingly, First Bank's depositors have been notably silent; much of their investment here, industry analysts say, was meant to avoid U.S. and Canadian taxation, a move few wish to advertise.
But their angst is reflected in a private e-mail group set up on the Internet on July 1 and shut down last week. In that time, the depositors exchanged more than 1,400 messages, ranging from prayers of hope to profound bitterness to resignation--much of that grounded in information in documents that first surfaced more than a year ago.
Those documents, which are on file in Grenada's high court, confirm that Grenadian Prime Minister Keith Mitchell was told that First Bank--in fact, the nation's entire offshore sector--was in precarious shape a full 17 months before the Finance Ministry stepped in.
The documents were filed as exhibits by Grenadian accountant Lauriston Wilson, a retired senior civil servant in the Finance Ministry who was hired by First Bank to do its first independent audit in December 1998.
In a recent interview, the graying, soft-spoken Wilson recalled that he became alarmed soon after he began the audit. "We saw a lot of expenditures but not any real income," he said. "The deposits from depositors were classified as income--not liabilities."
On March 26 last year, he sent Mitchell--who was also serving as finance minister at the time--a three-page letter stating that the bank lacked proper internal controls and accounting systems, that it failed to provide the names and addresses of the financial institutions that could verify its assets and that there were "general interference with and obstruction of the course of the audit by the Chief Executive Officer," namely Brink.
Assets Reportedly Grew to $14 Billion in a Year
Wilson further warned that "the assets of the bank are bogus and fictitious." He noted dubiously that the bank claimed to have increased its assets from $110,000 to $14 billion in one year. And he recommended that Mitchell remove his handpicked chief of the offshore sector, Michael Creft, and appoint a committee to revamp the entire industry.
Mitchell announced that he was calling in the FBI to investigate--the agency declined to confirm or deny that--but he has continued to stand by Creft, who has since written sworn court affidavits and a letter to the Ugandan parliament vouching for First Bank as a healthy financial institution.
Creft conceded in an interview this week that he and his government had made mistakes in the First Bank case, which he blamed on inexperience and understaffing. He added that he now regrets having stood up for the bank in writing: "In retrospect, I was wrong. That I would readily admit.
"I'm not going to sit here and say mistakes were not made," he said. "I would be the first to say there were. But there were only two of us at the time. . . . We didn't have the staff to oversee and supervise the bank, and I think, in retrospect, we should have acted much faster."
But Creft, who said he has an economics degree from Canada's University of Manitoba but never worked in banking or finance before becoming head of Grenada's offshore sector, denied that the government took no action despite Wilson's allegations: "We consulted with the FBI on a quiet basis. . . . We had several meetings with the FBI special agents. We sent information to them."
And what was First Bank's response to Wilson's allegations? The bank won a court order for the return of its records, which Wilson said he had kept as evidence for what he assumed would be a government investigation last year.
In April 1999, Brink ran a single-spaced, two-page ad in the weekly newspaper the Grenadian Voice in which he defended himself, denying the auditor's findings and Marchant's allegations.
Brink asserted in the ad that he had repaid half the $1.1 million in debts from his 1994 Oregon bankruptcy and that the "precious stone" that helped capitalize the bank was worth $20 million. He conceded that he first entered Grenada on a passport from the Dominion of Melchizedek as "ambassador at large" but asserted that the entity has a government and "sovereign claim to an above-sea-level landmass."
The ad was an apparent response not only to a series of stories in Offshore Alert but also to articles by another weekly here, Grenada Today.
Most recently, the weekly published excerpts from a July 4 letter to depositors from a new bank chairman, Richard Downes, who warned of a severe cash-flow problem.
"The current situation is we have withdrawal demands exceeding the present available cash. Again, no smoke and mirrors. Just facts," he wrote. In the letter, Downes, who could not be located for comment, praised Brink, who "for all his faults and failings" did resign his positions partly to clear the bank's name.
"We are apologizing," the letter added, "and asking for your forgiveness."
Meanwhile, for Marchant, who insists that the bank's misdeeds--and not his crusade--are the cause of its collapse, the lesson from First Bank is a basic one: "There are so many . . . people out there who think they can sit at their television set, eating bowls of ice cream, watching 'The Young and the Restless' and, in 15 months, a fat check will show up from their offshore bank.
"Unfortunately, life is not like that."
August 29, 2007
Five people who never got much past a high school education somehow managed to pass themselves off as sophisticated financial experts and defraud thousands of investors out of more than US$170 million through an offshore bank in Grenada.
Four of them are now heading to federal prison after they promised interest rates as high as 300 per cent through their First International Bank of Grenada, claiming that deposits were safe and sound, backed by the international equivalent of the Federal Deposit Insurance Corporation.
Con game called a Ponzi scheme
In reality, federal prosecutors said, it was a classic con game called a Ponzi scheme - taking money from investors to keep luring more investors into the scheme without ever paying them back - all based on a stack of phony documents.
It left a trail of ruined retirements and even personal bankruptcies.
"Unwitting investors put their life savings and retirement funds into a scheme that was doomed to collapse, rather than into the safe and profitable investment they thought they were getting," federal prosecutors said in a sentencing memorandum.
Douglas Ferguson, Laurent Barnabe, Robert Skirving and Rita Regale all were officers of the First International Bank of Grenada, founded by former Portland mortgage banker and minister Gilbert Ziegler, who died in 2005 while awaiting trial.
The four remaining defendants all apologised to their victims during their sentencing on Monday in the United States District Court, after hearing some of those victims talk about the financial misery they have suffered since the phony bank collapsed in August 2000.
Us citizens affected
Investors were scattered around the world, but most of the roughly 4,000 were U.S. citizens, many of modest means hoping to boost their retirement income.
"Someone who steals people's hard-earned money for retirement should not be allowed out on the street again," said Albert Ashwell, of Raymore, Missouri, who lost US$60,000 in the scheme and blames it for causing so much stress for his wife that she had to seek counseling.
"I hope they rot in hell," said Bob Stone of Portland, who said he was 86 and lost US$60,000.
Although the admitted mastermind of the scam, Ziegler, is dead, U.S. District Judge Garr King said the remaining four shared responsibility for what was "clearly a scheme from the beginning to separate these individuals from their money."
The scheme centred around the First International Bank of Grenada, but also operated a series of banks that included Fidelity International Bank and 13 subsidiary banks from 1996 to 2000, according to court documents.
Prosecutors noted in their memo that the so-called International Depositors Insurance Corp. that was supposed to protect the deposits "was even more of an empty shell" than the bank. "For most of the conspiracy, it was little more than a fax machine in the back room of a law office in the impoverished Caribbean nation of Dominica," the memo said.
The investigation stretched over three continents and eight years, and involved expensive cars, a yacht, a multimillion-dollar home in Las Vegas, a walled estate in Uganda where Brink and Ferguson were arrested as fugitives in May 2004, and claims of a four-pound (1.8 kilogramme) ruby.
The bank began with a phony claim by Ziegler, also known as "Van Brink", that its assets were backed by a 10,000-carat ruby appraised at US$20 million. But it was actually owned by a California man "who had never heard of the bank or Van Brink," prosecutors said.
The bank's assets included financial instruments - documents - "purporting to be from legitimate financial institutions such as the Bank of China, Union Bank of Switzerland, and Dai-Ichi Kangyo Bank worth more than US$10 billion."
But, "without exception, those instruments were counterfeit," prosecutors said, adding that "many were laughable" while the remaining assets "were nothing more than pieces of paper traded among like-minded con men."
Now, after three years in court, most of the US$170 million invested in First International Bank of Grenada is gone.
About a third went back to investors as phony interest payments, some went to expenses - such as US$30,000 charter jet trips for Regale. Some was lost when the defendants were, in turn, scammed by other con men, but "much of it was simply squandered," said Assistant U.S. Attorney Kent Robinson, who prosecuted the case with Assistant U.S. Attorney Claire Fay.
Skirving was ordered to pay more than US$32 million in restitution, while Ferguson, Barnabe and Regale must repay more than US$26 million.
It appeared doubtful that investors would see much more of their money, with Ferguson living on his monthly Social Security payments, and Regale working in a grocery store while she awaited sentencing.
She was given the lightest sentence after King rejected the government recommendation of nearly four years, ordering her to serve 18 months, citing her cooperation with prosecutors.
Skirving, 59, of Portland, was given the toughest sentence, eight years, while Ferguson, 74, of Portland, must serve nearly 4.5 years.
Barnabe, 68, a Canadian citizen who lives in suburban Lake Oswego, was sentenced to six years and ordered to forfeit his interest in money held in a foreign bank account.
Nov 27, 2002: SEC settles charges of $22M trading scam
The U.S. Securities and Exchange Commission said it settled a case in a Massachusetts federal court last week against a Florida man accused of a trading scheme that bilked at least 50 investors for roughly $22 million. Many of the investors who participated in the scam promoted by Miles M. Harbur, of Jupiter, Fla., were members of the Christian Science Church, which has its headquarters in Boston.
In its complaint, filed on April 16, 2001, the SEC alleged that between 1997 and 2000, Harbur and others participated in a fraudulent trading scheme under the names Swiss Asset Management and Resource F, and solicited investors by saying the deals involved high-quality debt instruments of very large international banks, that the investors' principal was never at risk and could be returned after one year and that investors would receive profits of approximately 4 percent every month.
Under the settlement, Harbur neither admitted nor denied the allegations.
Eric E. Resteiner
June 28, 2007: FORMER CHRISTIAN SCIENCE PRACTITIONER SENTENCED TO 87 MONTHS IMPRISONMENT FOR OPERATING FICTITIOUS INVESTMENT SCHEME
The Securities and Exchange Commission announced today that the federal court for the District of Massachusetts sentenced Eric E. Resteiner for criminal charges based on his operation of a fraudulent investment scheme through which he raised more than $30 million. Resteiner was a defendant in a previously filed SEC fraud action based on the same conduct. The sentence, handed down on May 16, 2007, ordered Resteiner to serve 87 months of incarceration, followed by two years of supervised release, and to pay restitution in the amount of $33.9 million. Resteiner renounced his U.S. citizenship in 1995, and will be deported from the United States following his term of imprisonment.
The criminal indictment alleged that Resteiner created and executed a scheme by which he defrauded approximately 50 investors, many of whom were members of the Church of Christ Scientist (Christian Science Church), out of more than $30 million through a purported high-yield, international bank trading program. As part of this scheme, Resteiner, assisted by others, made false representations to prospective investors, including that he was one of only a few people in the world permitted to conduct "off-balance sheet" trading, that his trading program would pay annual returns of no less than 50 percent, and that investors' principal would never be at risk. The indictment further alleged that Resteiner knew that he was not a trader and had no way to generate the promised investment returns, that investors' principal was not safe, and was in fact being used to pay purported "interest" payments to investors to lure more investors into the scheme, and to support his lavish lifestyle. The indictment alleged Resteiner maintained homes in the Bahamas and in Switzerland, a yacht, an airplane, a helicopter, two Rolls Royce motor cars, two Hummer vehicles, a Porsche Carerra sports car, and other assorted vehicles.
Fraudster Eric Resteiner seeks funding for ‘mind-reading scientist’: June 4, 2013
Released from prison three years ago and with judgments of $60 million against him still outstanding, convicted investment fraudster Eric Resteiner, 54, is back in business, operating from the Seychelles and Singapore.
Brennan trust fund tied to Ponzi scheme
The offshore family trust established by Robert E. Brennan, the high-profile broker who bilked thousands of investors by manipulating penny stocks, ended up in the hands of a Caribbean investor convicted of running a massive Ponzi scheme, a state attorney said yesterday.
Deputy Attorney General Anna Lascurain appeared in federal bankruptcy court in Trenton in an attempt to reopen Brennan’s bankruptcy case on behalf of the state Bureau of Securities. She said the trustee of the family’s Cardinal Trust, Michael L. Paton, was involved in a Ponzi scheme created by an associate that included Brennan’s money.
Lascurain told U.S. Bankruptcy Judge Kathryn C. Ferguson that Brennan is cooperating with investigators in trying to repatriate the trust, which held $6.4 million in 1998, to the United States. Brennan established the Cardinal Trust in 1994 for his adult children.
“While he was attempting to hide the trust from the government, he had given it to a man in the Bahamas,” Lascurain said. She did not elaborate on how the Ponzi scheme worked and declined to comment when the hearing was over. Brennan did not attend the hearing, and was not represented by counsel.
In an affidavit last month, Lascurain said the trust was first established in Gibraltar, then moved to Mauritius and on to Nevis. She said yesterday, however, the trust is now in the Bahamas under Paton’s control and he has refused to turn over the funds to American authorities.
“The trust had created a paper trail showing the funds had been transferred to Nevis, but in actuality, they remained in the Bahamas,” said Jeff Lamm, a spokesman for the state Bureau of Securities.
Lamm said the bureau wants the trust to provide restitution to Brennan’s victims. The state still has an outstanding $45 million judgment against Brennan, but it has only received $5.15 million from him to compensate victims, Lamm said. Ferguson questioned whether the federal bankruptcy court has jurisdiction over the matter and asked Lascurain to file supporting briefs prior to a hearing scheduled March 8.
Lascurain told the court Paton, an attorney in the Bahamas, had invested some of the trust money with Eric Resteiner, a convicted felon. Resteiner, a citizen of the Seychelles Islands, is serving time in a federal prison in Pecos, Texas, for wire and mail fraud.
Resteiner said in a 2008 affidavit he was a former neighbor of Michael and Lennox Paton in Lyford Cay, the Bahamas. In 2000, Resteiner said, Lennox Paton visited Resteiner at a Swiss chalet he had rented.
Lennox Paton, also an attorney, told him Brennan was “crafty” at concealing assets and “was hiding money all over the world,” Resteiner said. Lennox Paton told him his son, Michael Paton, was “proud that he was hiding money for Bob,” the affidavit said. Resteiner said he pooled $5 million of Brennan’s money with other funds. However, when state and federal authorities started looking into the trust, Michael Paton told Resteiner to return the money or his reputation would be harmed, the affidavit said. Resteiner said he paid all the money back except for $450,000.
He said he believed the money was going to Brennan’s children.
Resteiner claimed he was not providing the information to curry favor with federal authorities.
The Securities and Exchange Commission won a $25 million civil judgment against him and a co-defendant in 2006 because of an alleged fraudulent trading scheme.
The SEC had accused Resteiner of perpetrating the fraud against members of the Christian Science Church.
Last February, Resteiner pleaded guilty to operating a $47 million Ponzi scheme through companies he controlled in the Bahamas. U.S. Attorney Michael J. Sullivan said he used investors’ money to support a “lavish lifestyle,” including a home in Nassau, the Bahamas, and a 176-room villa in St. Moritz, Switzerland, with a domestic staff. He also owned a 110-foot yacht, a private airplane, a helicopter, and two Rolls-Royces.
Voldemar Arnold VonStrasdas
A man who has been ordered by a federal court in Boston to pay the government tens of millions of dollars because of his role in an alleged securities scam aimed at Christian Scientists has filed for bankruptcy in South Florida.
Voldemar Arnold VonStrasdas of Lake Worth says he has only $1,997 in assets, according to his December bankruptcy filing in West Palm Beach. Yet he owes the federal government more than 15,000 times that amount.
In 2001, the Securities and Exchange Commission in Boston filed civil fraud charges against VonStrasdas and three other men for allegedly raising $22 million from at least 50 investors across the country by promoting bogus investments in an international trading program that did not exist. If only 50 investors were involved in a $22 million scheme, this was a pricey investment. SEC officials said investors, most of whom were Christian Scientists, were told they would earn profits of 48 to 60 percent a year. The money was funneled to bank accounts in the Bahamas, regulators said.
In August, a federal judge ordered VonStrasdas and one of the other men to pay a $30.3 million judgment and penalties after they failed to respond to the SEC's charges. The third man agreed to a separate settlement and the fourth man's case is pending.
While both men were listed in the complaint as residing in Nassau, Bahamas, court records show that VonStrasdas has lived on and off in Palm Beach County for years. The Lake Worth home where he now lives was purchased for $210,000 in December 2001 and is in his wife's name, according to property assessor's records.
VonStrasdas could not be reached for comment despite repeated calls and messages left at his home.
But in his testimony at a Jan. 9 creditors' meeting in his bankruptcy case, he strongly denied the SEC's fraud charges. He testified that he had been used as a "scapegoat" by one of his co-defendants, whom he said had been responsible for the disappearance of clients' funds. VonStrasdas said he had reported this to the FBI, the CIA and the SEC and also had filed a lawsuit in the Bahamas against the man, who he said now lives in Egypt.
"I'm the only guy that's been trying to get restitution for my clients, the only guy, and you all gave me a default judgment that I think is unbelievable," VonStrasdas told an SEC attorney at the meeting. "I mean, you know, I can't even pay for gasoline, never mind $30 million."
VonStrasdas, 60, who in 1995 was named a director of the Palm Beach Rotary Club, states in his bankruptcy filing that he is retired and that his only income is $909 a month in Social Security benefits. He lists the SEC as a creditor, along with two credit card companies to which he owes $9,507.
VonStrasdas testified that he had no alternative but to declare bankruptcy. "I can't work for anybody because of this record. It's outrageous. I'm a U.S. citizen. I'm a naval officer, you know, gave my life for the country," he said.
Later on, VonStrasdas testified that he renounced his U.S. citizenship in 1999 or 2000 and is now a citizen of Grenada and of Lithuania, where he said he was born.
VonStrasdas was employed by various U.S. brokerage firms from 1988 until July 1995, according to the SEC. He said at the creditors' meeting that he had worked in banking and on Wall Street for most of his career.
In 1999, he legally changed his last name from Strasdas to VonStrasdas, according to Palm Beach County court records. He testified that he made the change because it was his family's original name in Lithuania.
This wasn't the first time he has been involved in a legal controversy, court records show.
In 1993, the Florida Department of Insurance issued a complaint against VonStrasdas, then called Strasdas, for misappropriating auto insurance premiums from clients. He was ordered to pay $500, but when he failed to do so, the department revoked his insurance license in November 1996, according to DOI records.
In 1996, a Palm Beach County judge ordered Strasdas and two of his companies to pay a $25,857 judgment after an elderly widow sued, claiming he had failed to repay a loan. The woman, a family friend, said she had given Strasdas and one of his companies $20,400 after he told her that he had an "emergency business situation" and his investments were tied up, according to court records. She said she signed a check payable to the company and that he gave her a promissory note that he said would be repaid in three months. It never was, she said in her complaint. Strasdas eventually repaid the woman after the court judgment, according to her attorney.
April 16, 2000
Zigmund John Strasdas, 90, of Jupiter, FL, passed away Tuesday, (April 11, 2000) at St. Marys Medical Center, West Palm Beach, FL. Born in Lithunia, he had been a resident of Jupiter for 23 years, coming from Wethersfield. Prior to retirement, he was an accountant with Traveler's Insurance Co. in Hartford for 15 years. He graduated from Teachers College and the Lithuanian Military Academy. He was past Governor and President of the Wethersfield Civitan Club; a former Senator of the Lithuanian Community in Florida; was actively involved in the Repulican Party and was an avid chess player. Survivors include his wife, Martha Ruth Strasdas of Jupiter, FL; two sons, Arunas Strasdas of North Palm Beach, FL and Voldemar Strasdas of Boynton Beach, FL; seven grandchildren; and nine great grandchildren.
Part 1: The Grenada Development Company
1. The Levera Development Project: Between 1998 and 2004, we the people noted various references to a Levera Development Project in the Budget Speeches by our respective Ministers of Finance in the NNP regime, Prime Minister Keith Mitchell and Hon. Anthony Boatswain:
The Budget Speech of 2004 notes a government guarantee of EC$29.7 million for the Grenada Development Company in respect of the Levera Golf Course and Hotel Development.
2.Levera Beach Hotel Ltd.: A company called the Levera Beach Hotel Ltd. was incorporated in 1999 - reference Certificate of Incorporation, No. 140 of 1999-3089 - with registered offices at George Patterson Street, Grenville, St. Andrew’s. It had a share capital of USD 1 million. The directors of the company were named as Peter Capella, Winston Whyte and Wilhelm Burger.
It is reasonable to conclude that the Levera Beach Hotel Ltd. was one of the groups to which Hon. Boatswain was referring in his 2000 Budget Speech when he referenced the Levera Hotel Project, noting that “two separate developers were competing for the right to undertake this highly significant project”
Since it is alleged that Peter Capella introduced Viktor Kozeny to Grenada and it was just around this time that Mr. Kozeny was supposedly embarking on the Blue Lagoon Project, of which Mr. Whyte was the agent, it also seems reasonable to ask whether or not Viktor Kozeny had any interest in Levera.
3.Levera Development Project: It was around 2001-2002 that we the people first heard of the Grenada Development Company. There seemed to be much mystery as to who were the directors and shareholders of this company, into whose control a significant portion of the people’s assets, lands in Levera, had been to facilitate the Levera Development Project.
The first significant information on this project was gleaned from a presentation to the Sustainable Development Council meeting on June 21st, 2002. by the local representatives of the project, Mr. Lyden Ramdhanny and Ms. Joan Charles. They advised the meeting as follows:
In 1997, the developers announced the project for Grenada but the ground breaking ceremony was held in October 2001. The project included an 18 hole championship golf course and hotel. The company had a strong economic plan for the area – small businesses would be created and local businessmen would have the opportunity to own them. During a later phase of the development, the Pearls Airport would be developed.
4.Grenada Development Co.Inc. It appears that a non-profit organization, the Grenada Development Co. preceded the Grenada Development Co. Inc. The Grenada Development Company, was incorporated in Alabama, USA in April 1984 and registered in Grenada in May 1984 with a mission to bring “Christian morals and virtues’ to Grenada. It is unclear what activities this organization undertook in Grenada.
In December 1998, the Grenada Development Company named the following as directors: Willis Gene Meeks of Duarte, California and Cecile De Lisle Barker of Potomac, Maryland
Shareholders in the Grenada Development Company and number of shares owned were named as follows: Cecile De Lisle Barker 900,000, Government of Grenada 100,000.
This information suggests, therefore, that the status of the Grenada Development Company changed from that of a non-profit company and it would appear that the company was later re-incorporated.
A Google search revealed that both Mr. Barker and Mr. Meeks were associated with the OAO Corporation founded by Mr. Barker in 1973. So just who is Mr. Cecile Delisle Barker?
4.1Cecile Delisle Barker: A Google search on Cecile De Lisle Barker suggests that Dr. Cecile Delisle Barker belongs to the “who’s who” in science and business in America. A web article of August 15th, 2001, “50 Most Important African-Americans in Technology list announced “ - identifies Mr. Barker as one the 50 most important African-Americans in technology in America. The biographical note provided the following information:
He was the CEO of OAO Corporation, Greenbelt MD. Dr. Barker first gained fame as head of the National Aeronautics and Space Administraton’s(NASA’s) Orbiting Astronomical Observatory and he used those initials to found his company OAO in 1973. OAO Corporation was a major contractor to defence, intelligence and other government agencies.
It appears that Mr. Cecile D. Barker is/was well connected. He served as a member of: The Advisory Committee for Scientific Policy for the National Science Foundation, Science and Technology Advisory Committee for the Executive Office of the President of the United States
It also appears that Dr. Delisle Barker has/had diverse business interests: Based on information obtained from corporationwiki, it seems that between 1999 and 2009, he incorporated ten (10) companies in the Miami area. It is unclear what the business of these companies are/were but it is possible that some of them might be/might have been in the real estate business. One company, SoBe Entertainment International, incorporated on July 9th, 2009 and listed as the only active company at the moment, appears to be in the music recording business. A look at its website states that it was founded in 2003.
In 1997, Mr. Barker was also part of an Afro-American trio of investors which outbid Hyatt Regency and Wyndham chains to Royal Palm Crowne Plaza Hotel in Miami which was to be the first 100 percent Afro-American owned hotel. His partners in the investment group were R. Donahue Peebles of R. Donahue Peebles Companies and Motown Records Chairman, Clarence Avant. It appears that Avant bowed out while Barker was sued out of his interests in the project,
It appears that he also dabbled in boxing promotion. There are references to the promotion of a fight involving Riddick Bowe, a former world heavy weight champion which never materialized since a federal judge imposed a ban as part of an amended sentence on the boxer, (who was in trouble with the law).
An August 2001 web article names Mr. Barker as the owner and sole investor of the Washington Harbour Club restaurant and as the founder and majority owner of Club 1223 and Spank located on Connecticut Avenue, NW.
4.2.OAO Companies: An overview of the OAO Corporation makes reference to the OAO family of companies: OAO Corporation, OAO Technology Solutions and OAO Services.
3.2.1.OAO Corporation: Mr. Delisle Barker was the founder, chief executive officer and chairman of the Board of Directors and majority owner of the OAO Corporation till December 2001. He founded the OAO Corporation in 1973 “to provide total solutions for aerospace and information systems industries”. The Federal Government was a major client of OAO Corporation. OAO Corporation was acquired by Lockheed Martin Technology in October/November 2001.
3.2.2OAO Technology Solutions Inc.: According to its website, OAO Technology Solutions Inc. was originally a division of the former OAO Corporation but was spun off in 1996 to focus exclusively on providing IT services. Mr. Cecile Delisle Barker was vice chairman of the Board of Directors. In September 2003, OAO Technology Solutions announced the formation of its European Advisory Board and the appointment of the Board's inaugural members. Among those were Sir Christopher Lewinton, Chairman of J. F. Lehman & Company Europe who also became chairman of the Board of Directors. ( In case that name sounds familiar, Sir Christopher Lewinton is the Chairman of the Board of Camper and Nicholson Marina Investments, CNMI, owners of the Camper and Nicholson Port Louis Marina in Grenada)
It appears that in January 2010, a California–based company, Platinum Equity acquired OAO Technology Solutions Inc.
4.Grenada Development Co. Inc. – Government of Grenada:
4.1.Loan Guarantee by the Government of Grenada: Information on the loan guarantee by the Government of Grenada to the Grenada Development Co. Inc. has been deduced from the Indenture of Conveyance, Grenada Development Co. Inc. to Levera Resort Development Inc., Liber 2-2008. The Government of Grenada guaranteed a loan between the Grenada Development Co. Inc and the International Bank of Miami N.A., agreement of 6th September, 2001. It would seem that this loan facilitated the purchase of three lots of land,(in total estimated 90 acres) from Kent Estates Ltd.
By way of legal mortgage, this property purchased from Kent Estates Ltd. was conveyed by the Grenada Development Co. Inc. in favour of the Government of Grenada, mortgagee. It would appear that the property was mortgaged to government as part of the company’s obligations in respect of a loan guarantee by the government.
It is useful to note that the consideration paid to Kent Estates Ltd. was XCD 4,334,906.50
Reference to a loan guarantee for the Grenada Development Co. Inc. was first made in the 2004 Budget Speech and the amount stated was XCD29.7 million.
4.1.Conveyance of the People’s Property - GOG Lease to the Grenada Development Co. Inc: The Government of Grenada leased 243 acres of the property of we the people to the Grenada Development Co. Inc. It acquired the property of some of we the people to “give” to the Grenada Development Co. Inc. (Attorney, Mr. Reynold Benjamin represented one of those persons, Henry “Little” Crawford, and has written extensively about this injustice).
This lease is recorded in the Deeds and Lands Registry on 13th August 2003, Liber 23-2003, page 107. It was prepared by Grant, Joseph & Co. It is unclear who perused the document. The lease was made on 29th July, 2003 between Sir Daniel Williams, Governor – General, acting on behalf of the Government of Grenada,(Lessor) and the Grenada Development Co. Inc., the lessee. The lease was for 243 acres 1 Rd. 20 pls of Crown Lands for a period of 99 years from August 1st, 2003. The First Schedule identifies the development to be undertaken - a resort hotel, international business centre, golf course, villas, retail commercial units, fitness centre, cultural centre, medical clinic, eco-village, environmental education centre and all related facilities. The Third Schedule provides for monthly rent of USD 22,000 per month from August 1st, 2003 till the completion of 90 villas and USD 11,000 per month thereafter. H.E. Sir Daniel Williams, Governor-General signed on behalf of the Government of Grenada while Joan Charles, Director, and Valerie Parris, Secretary, signed on behalf of the Grenada Development Co. Inc.
Among the provisions of this lease were: Permission to assign the lease as security: The lessee, i.e. the Grenada Development Co. Inc, could, with the prior consent, in writing, of the Government of Grenada, assign its leasehold interest as security for the repayment of any loan made to it and secured by way of mortgage. Simply put, the Grenada Development Co. Inc. could use the people’s property as security for its mortgage. Government to settle any claims on property at its own expense: Should any person(s) make any claim/claims in respect of the leased property (“the demised premises”), the Government of Grenada would take all “reasonable steps” to settle the claim/claims at its own expense. So this means that the Government of Grenada was/is responsible for settling the claims for those private lands that were acquired.
5. The True Story of Levera Beach Resort : Attorney-at-law, Reynold Benjamin who is from St. Patrick’s, and who describes Levera as the stomping ground of his youth, has written extensively about the debacle of the Levera Development Project in a series entitled “ The True Story of Levera Beach Resort”. Particularly, he seeks to bring attention to the tragedy of a local land owner, Henry Crawford Williams a.k.a Little, who lands were acquired and who died from stress - brought on by the grief of seeing his life’s work bulldozed before his very eyes and his fight to get compensation from the Government of Dr. Keith Mitchell.
In Part 2 of his series, Mr. Benjamin makes reference to two documents: a March 27th 1998 Memorandum of Understanding between the Keith Mitchell-led Government of Grenada and local representatives of the Grenada Development Company Inc. A letter of July 31st, 2001 to Hon. Anthony Boatswain from one Andrew R. Oliver, Project Manager of the Levera Development on behalf of the GDCI.
5.1.Memorandum of Understanding: According to Mr. Benjamin’s article, the MOU provided for the following: Assistance to Grenada Development Company Inc by the Government of Grenada re the identification of lands for purchase in and around the proposed building site at the Levera beach. Sale of land owned by the Government to the GDCI at a price to be negotiated. Legal costs - each party was to bear its own legal costs
5.2.Letter of July 31st, 2001 from Andrew R. Oliver: According to Mr. Benjamin’s article, one Mr. Andrew R. Oliver,(“describing himself as Project Manager”) wrote to Hon.. Anthony Boatswain, Minister of Finance. According to Mr. Benjamin, his perusal of Mr. Oliver’s letter and its enclosures revealed the following:
At the date of the letter, July 31st, 2001, the GDCI had no money of its own to: Purchase government or private lands, Pay for legal expenses, Pay procurement commission to the firm, hired to raise the loan for the project, GDCI was seeking to borrow US$5.9 million from the International Bank of Miami, Government had agreed to CONTRIBUTE Levera Estate, over 200 acres of the people’s property, to permit the project to move on.
5.3.Andrew Oliver: A website for a company called Oliver and Associates, shows a site plan for “Resort at Levera Beach” and advertises Levera as an “investment opportunity”. The company’s address was given as 1405 North Roosevelt Avenue, Pasedena, California. A Mr. Andrew Oliver, educated at universities in Alabama, is named as the CEO of the company.
According to this website, Mr. Oliver managed the development of Caribbean Resorts which includes: the Resort at Levera Beach, Grenada , West Indies (under construction) and Villagio di Portofino on the Dutch island of St. Maarten (completed). Villago di Portofino was described as follows: “The village is located along Simpson Bay Lagoon where boats and yachts frequent the waters between the French and the Dutch sides of the island. The village includes restaurants, a marina, boardwalk, and shops.”
While the search for the name Villagio di Portofino did yield results, it is unclear exactly what is Villagio di Portofino. Worthy of observation is the fact that the company’s Vice-President, one,Yolanda Oliver has an IT background and worked at Jet Propulsion Laboratory for 28 years managing the development of large-scale information systems for the NASA Earth Science Enterprise. (Jet Propulsion Laboratory was one of the clients of Mr. DeLisle Barker’s OAO company.)
6.Marianne Leggit: An undated online resume for one, Marianne Leggit of California ( ref. www.tgpinc.net/mlresume.html ) also makes reference to the resort at Levera. The resume advises:
“Ms. Liggett has been instrumental in the planning and design of The Resort at Levera Beach and the Pearls Airport renovation in Grenada, West Indies. She has worked in the Caribbean on the design and planning for the new casino, restaurants, luxury yacht docks and boardwalk in St. Maarten, Netherland Antilles; BOTH FOR OAO CORPORATION;
If this information is authentic, this reference to the OAO Corporation also points to a Cecile Delisle Barker involvement with resort development in Levera AND other development in St. Maarten.
7.Points to ponder:
- How is it that the Grenada Development Co Inc. in which the majority shareholder (90%) Mr. Delisle Barker, an apparently renowned scientist and successful entrepreneur, required a loan guarantee from the Government of Grenada?
- Did Mr. Delisle Barker have prior connections with any person/persons in Grenada?
- Mr. Delisle Barker seems synonymous with “science and technology”. Besides the ill-fated Levera Resort development, was Mr. Delisle Barker involved in any other initiatives in Grenada?
- Did Mr. Barker have competing or collaborative interests with any other group of investors/developers undertaking projects in Grenada?
- It would seem that notable Grenadian business man, Mr. Lyden Ramdhanny was some kind of agent/representative of the Grenada Development Co. Inc. What was Mr. Ramdhanny’s role in respect of the ill-fated project?
- Why did the Government of Grenada guarantee a loan for an “investor” that could not meet its obligations?
- The lease agreement was made in July 2003, ALMOST TWO YEARS after the loan with the Bank of Miami in September 2001? Why was the land leased two years after when it was already established that the company did not have the financial wherewithal?
- It would seem that shortly after the conveyance of the property in 2003 the project folded. Was the timing deliberate?
- Why did the Government of Grenada permit the assignment of the lease hold interest as loan security when it was ALREADY AWARE of the INABILITY of the Grenada Development Co. Inc. to meet its initial financial obligations?
- WHO negotiated on behalf of the Government of Grenada with this investor?
- The loan with the International Bank of Miami was negotiated in September 2001? Why was this only reported for the first time in the 2004 Budget Speech?
- Was Project Manager, Mr. Oliver, managing projects in St. Maarten and Grenada simultaneously? Were these interests related?
- Was the project in St. Maarten was completed while the one in Grenada flopped?
- Why is it that Mr. Oliver’s website has the Levera under construction? Is he still associated with the project?
- It is a remarkable co-incidence that OAO Technology became an affiliate of J.H. Lehman in September 2003 and that Sir Christopher Lewinton of Camper and Nicholson Marina International (owners of the Port Louis marina) at one time, chaired the Board of Directors of OAO Technology. Are there any other “remarkable affiliations” and business interests?
- Addresses in California seem to feature in many of the ill fated ventures in Grenada? Is this co-incidence or is there something more sinister?
Frederic Avery Bourke Jr.Edit
His father, Frederic Avery Bourke (1902 - 1963), worked for a steel company, Great Lakes Steel Corp.
Frederic Bourke, the co-founder of handbag maker Dooney & Bourke who was once part of the Ford family, was convicted by a U.S. jury of conspiring to pay bribes to government leaders in Azerbaijan in a 1998 oil deal.
Trial witnesses told of plane flights into Azerbaijan with millions of dollars stuffed into suitcases, of shakedowns in government offices, and of dealings with Chechen mobsters who provided protection to Kozeny’s operation.
Bourke, who was once married to a member of the Ford family, didn’t testify.
Eleanor Clay's husband, Frederic Bourke, 42. Bourke holds an MBA from Columbia University and is part owner of two successful companies: Dooney & Bourke, an upscale leather goods company in Norwalk, Connecticut, and Bourke & Matthews, contractors who build million-dollar homes along Connecticut's Gold Coast. Bourke grew up around the Ford family in Detroit and is close to Edsel. Energetic and loquacious, he engaged Petersen in an intense discussion about the company's future at Seal Harbor last summer. If a Ford in-law is ever considered for board membership, he is the most likely candidate.
Former bookkeeper from S.C. sentenced for embezzling millions
NEW HAVEN, Conn. (AP) _ A former bookkeeper was sentenced to nearly six years in prison Wednesday for embezzling millions of dollars from a Greenwich company, authorities said.
Ilona Muldoon, 42, of Abbeville, S.C., formerly of Chappaqua, N.Y., was convicted in February of unlawful interstate transportation of money taken by fraud. U.S. District Judge Mark Kravitz sentenced her to 71 months in prison and three years’ probation.
Authorities estimated Muldoon embezzled more than $15 million from her employer, Bourke and Matthews Management Co. Inc., from 1999 to 2004.
At the time, Muldoon and her husband, Theodore J. Muldoon III, lived in Chappaqua. Theodore Muldoon was the owner and operator of Hudson Canyon Construction Inc. of Millwood, N.Y.
Ilona Muldoon admitted she embezzled money from Bourke and Matthews Management and related companies by preparing checks for the owner’s signature, then using the checks to pay expenses she, her husband and her husband’s company had incurred, authorities said.
Ilona Muldoon took the checks from Bourke and Matthews offices in Connecticut and deposited them into various bank accounts in New York, including two bank accounts held by Hudson Canyon Construction at Hudson Valley Bank in Yonkers, N.Y., prosecutors said.
She was also ordered to pay restitution of $15.5 million to victims of the crime.
Last week it was revealed that Ben Stiller and his wife Christine Taylor decamped to their sprawling 30-plus acre country spread in serene and bucolically scenic Chappaqua, NY, that they very quietly purchased in September 2010 for exactly $10,000,000.
The ten million dollar deal appears to have gone down off market and a careful read of the somewhat convoluted property records suggests Mister and Missus Stiller purchased the gated estate about 40 miles from Midtown Manhattan from a non-famous fellow who acquired it just two years earlier from a somewhat infamous couple named Theodore and Ilona Muldoon.
Presumably Mister and Missus Muldoon sold the well outfitted estate after she—a bookkeeper—was convicted in 2007 for embezzling more than fifteen million bucks from her employer. Missus Muldoon, in case you might be curious, was sent to the white collar pokey for half a dozen years and ordered by the judge to pay $15.5 million in restitution for her fraudulent financial activities.
In a Democracy Now! exclusive, we look at the case of multimillionaire American businessman and philanthropist Rick Bourke, who blew the whistle on a fraudulent scheme by international criminals to gain control of the oil riches of the former Soviet Republic of Azerbaijan — only to end up as the only person sent to jail by federal prosecutors in the massive conspiracy. Since May, Bourke has been held in a federal prison, serving a term of one year and one day for violating the Foreign Corrupt Practices Act for alleged knowledge of the bribery that allegedly took place in 1998. Other investors in the Azerbaijan scheme included former Democratic Senate Majority leader George Mitchell and major institutions including Columbia University and AIG, but no one else was jailed in the United States. High-ranking former U.S. and British officials from the CIA and MI6 have raised serious concerns about the conviction of Bourke in part because the key witnesses during his trial were allegedly intelligence assets working for the U.S. government. They are not the only ones who question Bourke’s guilt. Even the judge in his case has admitted having doubts. At the time of Bourke’s sentencing, Shira Scheindlin of the Federal District Court said, "After 10 years of supervising this case, it is still not entirely clear to me whether Mr. Bourke was a victim, or a crook, or a little bit of both." We speak to Bourke’s lawyer, the law professor and renowned attorney Michael Tigar, as well as former Washington Post reporter Scott Armstrong. "Why is it that they would go after the guy that blew the whistle on the thievery and bribery, Rick Bourke?" Tigar asks. "Why is it that the Czech citizen and the guy, the ex-patriot, and the German-Swiss lawyer all are walking free; the American citizen, philanthropist, and so on, is sitting in a minimum security jail? Well, investment in the Azerbaijan hydrocarbon industry is now safely in the hands of major petroleum companies. Is that a reason?"
It’s our understanding, because we’ve done our own reporting on this in Democracy Now!, that key figures in the intelligence community or, former key figures in the intelligence community of both the United States and England, Sir Richard Dearlove the former head of MI6 and Jim Pavitt, former deputy director of the CIA — Head of covert operations — went to the court and attempted to raise what they knew about the connections of Hans Bodmer and Thomas Farrell to intelligence agencies and their role as assets. And they were denied the chance to testify, and the whole record was sealed.
WHEN Juraj Široký left the Czechoslovak embassy in Washington two decades ago, following his posting as secret agent and second secretary, he didn't forget about his colleagues in the communist intelligence service. After the 1989 revolution he continued to do business with them, first within an infamous asset-stripping operation known as the Harvard funds, and later within Slovak chemicals groups Chemolak and Plastika.
Today, Široký's "spy circle" has contacts with people at the top of the Economy Ministry under the Fico government, including minister Ľubomír Jahnátek from the ruling Smer party. Companies under Široký's wing last year won two tenders from the ministry together worth €4 million. Under the Fico government, Široký's firms have won several multi-million-euro contracts to build highways and renovate Bratislava Castle.
He got his start in business in the Czech Republic as the partner of Viktor Kožený, dubbed the 'Pirate of Prague', who is currently on trial in the Czech Republic for looting billions of Czech crowns from the Harvard investment funds in the mid-1990s. Kožený is currently in the Bahamas, beyond the reach of the Czech courts.
Široký did not respond to questions about his past from The Slovak Spectator. Economy Ministry officials denied that the businessman, who is widely regarded as one of the most influential figures behind the Smer party, had any influence over public contracts.
The Prague-based Centre for the Study of Totalitarian Regimes recently published a list of people who worked for the communist-era intelligence service at home and abroad. The name of Captain Juraj Široký appears there, along with that of Lieutenant Branislav Králik. Both men were officially second secretaries at the Czechoslovak embassy in Washington, but also worked as intelligence officers with the local residency, as foreign intelligence missions were known.
In 1993 Králik became the chairman of the board of Harvardský dividendový investičný fond Slovakia and the co-owner of the Harvard Real Estate Company in Bratislava with Široký. The two men were managers or owners of a further four companies. Major Josef Poštulka was the Washington resident, or head of the Czechoslovak intelligence mission there. According to Juraj Široký's intelligence file, which is with the Nation's Memory Institute in Bratislava, Široký was Poštulka's deputy in Washington from 1988 to 1990.
Following the 1989 revolution, Poštulka's name became linked to Harvard as well. According to the charges filed against Viktor Kožený by the Czech prosecution in 2006, Poštulka was the director of a Cyprus-based company called Harms Holdings. Harms was part of the portfolio of the Harvard funds, and was involved in dubious share transfers.
Poštulka later became the managing director of the Czech company Plastika-Isol from 1998 to 2004, the same period that current Slovak Economy Minister Ľubomír Jahnátek was head of the supervisory board. Poštulka was also a director of the Czech company Chemolak Trade. He was replaced in 2005 by Miroslav Trebula, who until February of this year was the director of the international trade section of Jahnátek's ministry.
Široký indirectly owns stakes in both Plastika and Chemolak. The Slovak Spectator was unable to reach Poštulka for comment. In a prior interview with the Hospodárske Noviny daily, Široký denied working for the communist state security apparatus, the ŠtB. "I was never either an employee or a collaborator with the ŠtB. I worked in the state administration, in the foreign service as an employee of the foreign ministry. That's all I can tell you.“
According to an evaluation in Široký's ŠtB file, however, the ŠtB was happy with his work for them in Washington. "He gradually came to grips with the complex issues involved in political espionage. He took an active part in leading the residency, and in preparing complex activities."
Peter Bučka, currently the head of office at the ministry - the top non-political post - was also sent to Washington in 1985 by the communist military intelligence, with the cover of a diplomatic posting. After two weeks he was exposed as a spy and was recalled. "There is no reason to connect this with Široký," he said of his employment with the ministry, adding: "Minister Jahnátek is my former classmate."
The Economy Ministry refused to comment on whether former ŠtB officers from Washington had any influence on ministry affairs. "This is a speculative question and it is not related to the functions of the ministry," said spokesperson Dagmar Hlavatá. Chemolak last year won a tender worth Sk60 million (€2 million) to supply paint to the electricity grid company SEPS, which comes under the ministry's authority. The bit-Studio company, which is owned by Široký's Druhá Strategická, won a tender of similar value for supplying computers and servers. According to the ministry, the firm's bid was the cheapest of three submitted.
"The fact that bit-Studio is owned by Juraj Široký is irrelevant to this contract," said Hlavatá. "We see no reason why bit-Studio should not have won this contract from the ministry if it met the conditions of the tender." The story of the Harvard funds
DURING the early phase of privatisation in the Czech Republic, the government handed out 'coupons' that people could redeem for shares in state companies. In the absence of significant pools of domestic capital, it seemed the easiest way to put assets back in private and local hands.
A young Czech emigrant and Harvard University graduate named Viktor Kožený saw an opportunity. Using a slick advertising campaign, he promised people who gave him their coupon books in exchange for shares in his 'Harvard' investment funds that they would receive 10 times their deposit. At its height in 1994, the Harvard funds controlled stakes in 50 of the biggest Czech companies, and was worth Kč60 billion, making it the largest non-bank investment fund.
But the promised returns never materialised, and the Harvard funds were stripped of their assets and ended up in bankruptcy. Kožený fled to the Bahamas, while his partner Boris Vostrý is in hiding in Belize.
The public finally got a glimpse of what went on at Harvard when Czech prosecutor Zdeněk Častoral filed 350 pages of charges against Kožený and Vostrý for fraud in 2006. The document, which is available on the internet, alleges that Kožený used his power of attorney for the Harvard funds to simply transfer company shares in the Harvard portfolio to offshore companies located in Cyprus. These Cypriot companies either paid nothing for the shares, or sent only an initial and insignificant payment.
Money was siphoned out of the Harvard funds in other ways as well. For example, according to the charges, Kožený bought shares on Harvard's behalf in the Czech firm SPT Telekom for Kč2,710 each from the Cypriot company Zenko Trading. A week later, in September 1995, he sold the same shares back to Zenko - but this time for Kč2,215 each.
"Kožený signed for Harvard, and his colleague, Juraj Široký, signed for Zenko," wrote Častoral. Through six such 'buy high, sell low' transactions Harvard suffered damages of Kč250 million, worth over US$10 million at the time.
Široký did not respond to questions from The Slovak Spectator. In an interview with the Hospodárske Noviny daily he said that he had been interviewed by Czech police in the Kožený fraud case. Regarding the SPT Telekom shares he said that "these were returned in a week. They were the same shares. That's what those police were asking about".
Born on December, 29, 1953 in Kosice, Czechoslovakia. In 1994 he became the vice-president of HC Slovan Harvard Bratislava. Was elected president of this club in 1998 and later also president of the Slovak Ice Hockey Federation, for which position he was re-elected in 2002. Since 2001 he is a member of the Sport Council of the Slovak Olympic Committee. His IIHF career began in 1999 in the Development Committee, since 2002 he his also a member of the Championship Structure Committee. Juraj Siroky was working for the Federal Ministry of Foreign Affairs of former Czechoslovakia in the 80s and was also employed at the Czechoslovakian embassy in Washington, USA.