US Attorney – Connecticut Investor Found Guilty in Scheme to Bribe Government Officials in Azerbaijan

LawFuel.com – 12 July 2009 – LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR.,
the Assistant Director-In-Charge of the New York Field Office of
the FBI, announced that FREDERIC A. BOURKE, JR., was found
guilty, following a six-week jury trial in Manhattan federal
court, of conspiracy to violate the Foreign Corrupt Practices Act
(“FCPA”) and related prohibitions, and of making false statements
to the FBI. The FCPA makes it a crime to pay or offer to pay
foreign government officials in order to obtain or retain
business.

As established by the evidence at the trial before
United States District Judge SHIRA A. SCHEINDLIN:

BOURKE participated in a scheme to bribe senior
government officials in Azerbaijan with several hundred million
dollars in shares of stock, cash, and other gifts, to ensure that
those officials would privatize the State Oil Company of the
Azerbaijan Republic (“SOCAR”) in a rigged auction that only
BOURKE, fugitive Czech investor VIKTOR KOZENY (who is charged in
a related case), and members of their investment consortium could
win, to their massive profit. Under the privatization program,
citizens of Azerbaijan could use free government-issued vouchers
to bid for shares of state-owned industries that were to be
privatized. Privatization vouchers were bearer instruments that
were freely tradable, and they typically were bought and sold
using United States currency. Foreigners could also participate
in Azerbaijan’s privatization program and own vouchers, but only
if they purchased a government-issued “option” for each voucher
they held. The vouchers and options were largely purchased with
millions of dollars of cash flown into Azerbaijan on private
planes, and were intended to be exercised by Oily Rock Ltd., a
company KOZENY allegedly controlled. BOURKE, a friend and
neighbor of KOZENY’s in Aspen, Colorado, invested approximately
$8 million in Oily Rock, on behalf of himself and family members
and friends. BOURKE also obtained directorships, salary, and
stock options with related companies that KOZENY allegedly set up
and funded.

The takeover of SOCAR, however, could only take place
if the president of Azerbaijan issued a decree directing SOCAR’s
privatization. Beginning in August 1997 through fall 1998,
KOZENY, BOURKE,and others conspired to pay or cause to be paid
millions of dollars worth of bribes to Azeri government officials
to ensure that their investment consortium would gain, in secret
partnership with the Azeri officials, a controlling interest in
SOCAR and its substantial oil reserves. For example, in August
1997 KOZENY allegedly agreed to transfer to corrupt Azeri
officials two-thirds of the vouchers and options Oily Rock
purchased, and to give them two-thirds of all of the profits
arising from his investment consortium’s participation in SOCAR’s
privatization. In June 1998 BOURKE knew that KOZENY arranged for
Oily Rock to increase its authorized share capital from $150
million to $450 million so that the additional $300 million worth
of Oily Rock shares could be transferred to one or more of the
Azeri officials as a further bribe payment. BOURKE also arranged
for two of the corrupt officials to receive medical treatment in
New York City on different occasions in 1998, for which Oily Rock
paid. Thereafter, in interviews with the FBI in April and May of
2002, BOURKE falsely stated that he was not aware that KOZENY had
made payments to the Azeri Officials.

BOURKE, 63, resides in Greenwich, Connecticut, and is
scheduled to be sentenced on October 13, 2009, at 4:30 p.m.
BOURKE faces a maximum penalty of five years in prison
and a maximum fine of $250,000 or twice the gross gain or loss
resulting from the alleged violations on each of the two counts
on which he was convicted. BOURKE was acquitted of one count of
money laundering.

The charges against KOZENY remain merely accusations,
and he remains presumed innocent unless and until proven guilty.
Mr. DASSIN praised the investigative work of the FBI
and thanked the Department of Justice Criminal Division.
The prosecution and the related case against KOZENY are
being handled jointly by the United States Attorney’s Office for
the Southern District of New York and the Fraud Section of the
United States Department of Justice. Assistant United States
Attorneys HARRY A. CHERNOFF and IRIS LAN, Fraud Section Deputy
Chief MARK F. MENDELSOHN, and Fraud Section Assistant Chief
ROBERTSON PARK are in charge of the prosecution.
09-210 ###

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