Connecticut Investor Frederic Bourke Sentenced to Prison for Scheme to Bribe Government Officials in Azerbaijan
|U.S. Department of Justice November 10, 2009|
WASHINGTON—Frederic A. Bourke Jr., of Greenwich, Conn., was sentenced today in U.S. District Court in Manhattan to one year and one day in prison, announced Mythili Raman, Principal Deputy Assistant Attorney General for the Criminal Division and Preet Bharara, U.S. Attorney for the Southern District of New York.
Following a six-week trial, Bourke, 63, was found guilty on July 10, 2009, 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. In addition to the prison term, U.S. District Judge Shira A. Scheindlin ordered Bourke to pay a $1 million fine and serve three years of supervised release following the prison term.
According to evidence presented at trial, 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, and members of their investment consortium could win, to their massive profit. Kozeny is under indictment in the Southern District of New York for his alleged role in the scheme.
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 U.S. 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.
According to trial evidence, Bourke, a friend and neighbor of Kozeny’s in Aspen, Colo., invested approximately $8 million in Oily Rock, on behalf of himself, 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, 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 allegedly 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 allegedly had made payments to the Azeri officials.
The charges against Kozeny remain merely accusations, and he is presumed innocent unless and until proven guilty.
The case against Bourke and the related case pending against Kozeny are being prosecuted by Deputy Chief Mark F. Mendelsohn and Assistant Chief Robertson Park of the Criminal Division’s Fraud Section, and Assistant U.S. Attorneys Harry A. Chernoff and Iris Lan of the U.S. Attorney’s Office for the Southern District of New York.