Monday, August 23, 2010

Another Stumble For The DOJ In The Kozeny Affair

The DOJ continues to encounter problems in some of its signature FCPA prosecutions.

Earlier this month, it was the Giffen Gaffe (see here).

Last fall, U.S. District Court Judge Shira Scheindin (S.D.N.Y.) remarked at Fredrick Bourke's sentencing that "after years of supervising this case, it's still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both." (See here).

And then there is Victor Kozeny, indicted along with Bourke, and the alleged mastermind of the fraudulent investment scheme related to the privatization of state-owned businesses in the Republic of Azerbaijan.

In 2005, Kozeny was criminally charged (see here) with, among other charges, one count of engaging in a conspiracy to violate the FCPA and twelve counts of violating the FCPA.

To make a long story short, Kozeny remains the most famous FCPA fugitive living a comfortable life in the Bahamas. The DOJ's repeated efforts to extradite him from the Bahamas to the U.S. have failed. See here.

In the indictment, the DOJ asserted that "Peak House" a multi-million dollar property in Aspen, Colorado was the site of certain of Kozeny's criminal activity.

Peak House was sold in 2001 for approximately $22 million and the DOJ sought civil forfeiture of the funds it alleged were connected to Kozeny's criminal activity.

However, U.S. District Court Judge Harold Baer (S.D.N.Y.) recently concluded that the DOJ's attempt was barred by the statute of limitations.

This latest DOJ setback in the Kozeny affair would seem embarrassing for the DOJ given that Judge Baer criticized the DOJ's lack of diligence in even attempting to file a civil forfeiture suit in a timely fashion.

Judge Baer concludes his opinion (see here) by stating:

"It is unfortunate that this action, which appears to have some merit and involves a substantial amount of funds, must be dismissed on procedural grounds, but there is no question that the Government learned of the Peak House funds at the very latest by 2005 and sat on its hands until 2009."

Brian Whisler (here), a former federal prosecutor and current partner in
Baker & McKenzie's white collar practice and individual who brought this decision to my attention, noted that "this defeat on procedural grounds represents yet another bump in the road for DOJ in the Bourke/Kozeny matter and suggests that DOJ will likely persist in its pursuit of Kozeny now that a criminal conviction is legally required to effect forfeiture of the sale proceeds of Kozeny's Aspen home and other assets."

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