Omega Advisors Nears Settlement of Suit Over Failed Azerbaijan Investment

Omega Advisors Inc., the $6 billion hedge fund run by Leon Cooperman, is nearing settlement of a lawsuit against a former executive who brought the firm into a failed $125 million investment in Azerbaijan.

Omega sued the executive, Clayton Lewis, in 2006, claiming he induced the company to invest in a 1998 effort in the Middle East nation to buy state-owned assets, including the oil company. Lewis allegedly concealed from Omega a fraud and bribery scheme he had entered into with the deal’s promoter, Czech financier Viktor Kozeny.

In a filing yesterday in Manhattan federal court, U.S. District Judge Naomi Buchwald dismissed the suit while saying the parties may re-activate the case within two months. Cooperman said in an interview today that the case is in “advanced settlement discussions.”

“Clayton Lewis brought me into a deal tainted by corruption,” Cooperman said. “He lied to me. He lied to co- workers.”

Terms of the pending settlement are confidential, said R. Scott Thompson, the lawyer for Lewis. If the case isn’t reactivated in the next 60 days “it’s over,” Thompson said in an interview.

Lewis pleaded guilty in 2004 to federal charges that he conspired with Kozeny to pay massive bribes as part of the Azerbaijan deal, and he agreed to cooperate with federal prosecutors in a criminal case against other investors. As part of his plea, he admitted knowing of the bribery scheme before bringing Omega into the deal.

Columbia, GE

Omega said in its suit that it was unaware of the scheme until long after its investment collapsed and that Lewis lied to Cooperman and other investors including Columbia University and General Electric Co. The company also claimed that Lewis helped Kozeny steal its investment, an allegation both denied.

Azerbaijan, a former Soviet republic, is an oil-producing nation of about 8.2 million people that borders the Caspian Sea, according to the CIA’s World Factbook.

Separately, Lewis has pleaded guilty to New York state charges that he perjured himself in front of a grand jury probing the transaction.

Another investor in the deal, Frederic Bourke, was convicted by a jury last year of conspiring with Kozeny to pay bribes in violation of the U.S. Foreign Corrupt Practices Act. Bourke is appealing. Lewis didn’t testify at Bourke’s trial and is scheduled to be sentenced on July 2.

Kozeny has also been charged in the criminal case and has fought extradition from the Bahamas, where he lives. Omega last year settled a separate lawsuit over the Azeri investment against Kozeny.

Prosecutors in 2007 agreed not to charge New York-based Omega. Omega admitted no wrongdoing while it “acknowledges responsibility” for Lewis’s conduct, the agreement says. The firm paid a $500,000 fine.

The case is Omega Advisors v. Lewis, 06-cv-834, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net.

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