In its prosecution of Frederic Bourke for violating the Foreign Corrupt Practices Act by helping Czech-born fugitive Viktor Kozeny bribe Azeri officials, the government plans to call at least two witnesses who have admitted their guilt in the case. Now Bourke is accusing them of committing other, previously undisclosed crimes.
Clayton Lewis was a partner in Omega Advisors, Inc., a hedge fund that invested about $126 million in Kozeny’s Azeri privatization scheme. In an enforcement action against Lewis in 2004, the government said he knew about the bribery allegedly involving Kozeny and Bourke but went ahead with Omega’s investment anyway. Lewis pleaded guilty to conspiring to violate the FCPA. He’s never been sentenced and almost everything in his court record is sealed. A June 2008 letter from the DOJ said Lewis is a cooperating witness and shouldn’t be sentenced until he’s testified for the government at Bourke’s trial.
Hans Bodmer was Kozeny’s Swiss lawyer who created the corporate entities and trust accounts used to make Kozeny’s investments in Azerbaijan. Bodmer was indicted by a New York federal grand jury in August 2003 on single counts of conspiracy to violate the FCPA and to launder money. The court dismissed the FCPA charge, ruling that before being amended in 1998, the FCPA didn’t apply to non-U.S.-resident foreign nationals who served as agents of domestic concerns. Bodmer then pleaded guilty to conspiracy to launder money. He’s never been sentenced and, with the government’s consent, has been living in Switzerland.
Bourke argued in a court filing last week that because the government “controls” the two witnesses, it’s obligated to produce evidence in their possession (citing Federal Rule of Criminal Procedure 16(a)(1)(E) and United States v. Stein, 488 F. Supp. 2d 350 (S.D.N.Y. 2007)). The government, Bourke said, has already refused requests for documents held by Lewis and Bodmer.
In seeking evidence from the government’s witnesses, Bourke’s new lawyer, Harold Haddon, has also launched an attack on their credibility and character. In the court filing, he called Lewis a liar:
In addition to being one of the Government’s key cooperating witnesses, Lewis is also an admitted perjurer. In February 2002, Lewis testified before a New York state grand jury investigating Kozeny’s fraud on his co-investors that he was unaware of any bribery of Azeri government officials. He has since recanted that testimony and told the opposite story to federal investigators—a story that will form the basis of his anticipated testimony against Mr. Bourke. He has also pleaded guilty to a New York state perjury charge relating to his prior testimony. [footnotes omitted]
In a preview of what the jury is likely to hear, Haddon drew a sharp distinction between Lewis and Bodmer on the one hand and Bourke on the other. Lewis, he alleged, took huge kickbacks from Kozeny in return for Omega’s investment, and had crucial help along the way from Bodmer. But Bourke, he said, is one of the victims of Kozeny’s fraud. Kozeny is accused in a pending New York State criminal case of stealing $182 million from investors. Bourke said he invested and lost $8 million.
Haddon said in the court filing:
There is reason to believe that Lewis and Bodmer were also involved in other serious wrongdoing that is not even mentioned in the indictment in this case. Omega, Lewis’s former employer, has alleged in lawsuits in New York and London that Lewis conspired with Kozeny in order to defraud Omega of millions of dollars, and to conceal whatever bribes may have been paid to Azeri officials. In return, it is alleged that Lewis personally received tens of millions of dollars in kickbacks from Kozeny . . .
And Bodmer, Haddon said, is alleged to have been “a key player in this kickback scheme, having created and structured a complex series of offshore entities and bank accounts designed to funnel money to Lewis while hiding the transfers from Lewis’s employer and other investors.”
The existence of the kickbacks, Bourke’s lawyer said, would make Lewis Kozeny’s “handsomely-compensated partner in crime and deception.” As to Bourke, “the Government has never alleged—and there is no evidence to suggest—that Mr. Bourke ever received any financial remuneration from Kozeny or his associates. To the contrary, he lost every dollar he invested in the Azeri venture. Why would Kozeny tell an individual investor like Mr. Bourke about bribes while simultaneously paying Lewis tens of millions of dollars to conceal the same information from Omega and the institutional co-investors?”
The government’s reaction to Bourke’s latest filings will be important. The Justice Department has been slammed lately with allegations of misconduct in other white collar criminal cases and its prosecution of Bourke is clearly aggressive. If Bourke’s lawyers believe the DOJ is crossing a line, they’ll hope for a sympathetic hearing from the court.
Download a copy of the May 7, 2009 memorandum of law in support of Bourke’s motion to compel Rule 16 discovery here.
Part I of this post can be found here.
Read all our posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.