Frederic Bourke, co-founder of the luxury-handbag maker Dooney & Bourke, is set to enter prison this week for conspiring 15 years ago in what prosecutors called “one of the most audacious” bribery schemes ever attempted in the former Soviet Union.
Bourke, 67, by court order must begin serving his one-year sentence by May 10. The judge recommended he be sent to a minimum-security camp in suburban Denver.
Bourke was convicted of a bribery conspiracy in 2009 in New York for investing $8 million in 1998 in a corrupt deal to seize control of the state oil company in Azerbaijan. The U.S. Justice Department considers his case one of its top victories under the Foreign Corrupt Practices Act, which outlaws bribes outside the U.S. by those doing business in the U.S.
“Bourke’s prosecution helped put the FCPA on center stage,” Richard Cassin, a lawyer who writes the FCPA Blog, said in an e-mail. “He was the DOJ’s biggest catch under the statute. More than anyone else, he made the once-obscure law famous.”
Since 2009, when Bourke was convicted, U.S. prosecutors have charged at least 63 people with FCPA violations, according to the law firm Shearman & Sterling LLP. In the four prior years, they charged 29.
Bourke lost his latest bid for freedom last month when the U.S. Supreme Court chose not to hear his claim that the trial judge gave jurors improper legal instructions. From his 2005 indictment through a lengthy appeal, Bourke claimed he was defrauded by the deal’s promoter, Viktor Kozeny, who has been referred to in court and news reports as “The Pirate of Prague,” and not a participant in the bribery plot.
“Bourke’s tale is stranger than fiction,” Cassin said. “He was swept up in Kozeny’s too-good-to-be-true scheme. He and his friends lost the millions they invested. So he gave the feds evidence of Kozeny’s fraud. They used the evidence to indict Bourke.”
Bourke made his fortune launching startups including Dooney & Bourke. Once married to a member of the family that owned Ford Motor Co., he invented several cancer treatments, according to court records.
He didn’t return a phone call seeking comment on his case.
His connection with the Russian oil deal started in 1998, when he joined an investment venture by Kozeny, then his flamboyant neighbor in Aspen, Colorado, whose home boasted a 1,000-bottle wine cellar and a cigar room dug out of an adjacent mountainside. Kozeny earlier fled his native Czech Republic after earning hundreds of millions of dollars buying state-owned companies and, according to Czech prosecutors, looting them.
Kozeny wanted to buy the state oil company in Azerbaijan, a former Soviet republic that was selling state assets. Short of funds, he recruited Bourke and others to join his deal.
Two Kozeny aides said at Bourke’s trial that they told him in early 1998 of Kozeny’s plan to pay billions of dollars to Azerbaijani leaders in return for the oil company. Bourke invested anyway, jurors found. Azerbaijan didn’t sell the oil company, and investors were wiped out.
Kozeny avoided the courtroom. Indicted with Bourke in 2005, he lives in the Bahamas, where he’s a permanent resident and spent 19 months in prison on a U.S. request. He later won a court order barring his extradition to the U.S.
Kozeny is also accused by the Manhattan district attorney of stealing more than $100 million from investors including Omega Advisors Inc., Leon Cooperman’s $6 billion hedge fund. Bourke, who isn’t charged in that case, testified against Kozeny before a grand jury.
In the Bahamas, Kozeny added a $13 million pool with an office, bar and underwater cavern to his $22 million beachfront home in Lyford Cay. He acquired a G-73 Mallard amphibian airplane and cruised on a 165-foot (50-meter) yacht, named Contemplation. He even bought his own island, Hall’s Pond Cay.
Kozeny, who once spent $96,000 on a meal for six while traveling the world in his private jet, is wanted by the U.S. for bribery and by New York for grand larceny. In the Czech Republic, he was convicted in absentia of looting assets and sentenced to 10 years in prison. He hasn’t left the Bahamas, where he lives in an oceanfront estate since 1999.
In March, U.S. District Judge Shira Scheindlin, who presided over Bourke’s trial, called Kozeny’s absence “the biggest disappointment” in the bribery case. At the time, she was sentencing Kozeny’s lawyer, Hans Bodmer, to pay a $500,000 fine. Bodmer pleaded guilty to money-laundering conspiracy and testified for prosecutors.
Kozeny responded to Scheindlin in an e-mail to Bloomberg News last week.
“The truth about the Azeri case was not told,” he wrote. As he’s claimed before, he said U.S. officials knew about “and encouraged” his actions, including his payments to Azerbaijan’s leaders.
“It is a pity that I was missing in the courtroom -- because the truth would be told,” Kozeny wrote.
Others in the case were jailed.
Bodmer was held for five months in a South Korean prison before returning to the U.S. and pleading guilty in 2004.
Clayton Lewis, an ex-Omega Advisors executive, spent six days behind bars before pleading guilty and cooperating. Kozeny aide Tom Farrell also pleaded guilty and aided the government.
The Azerbaijan venture didn’t end with Kozeny’s scheme.
To win control of the oil company, Kozeny purchased millions of coupons issued by the government of Azerbaijan, which he planned to use to buy the oil company. After the deal’s collapse, another investor, Gerald O’Shaughnessy, gained control of coupons held by Kozeny’s investors and Kozeny’s ex-business partner, according to records. O’Shaughnessy spent years urging the Azerbaijan government to redeem the coupons, records show.
By March 2008, the Azerbaijan government agreed to buy the coupons from O’Shaughnessy for $150 million, according to U.S. State Department cables that Bloomberg News obtained last month after a Freedom of Information Act request.
O’Shaughnessy, a Kansas-based oil executive who wanted $300 million from Azerbaijan, was helped in negotiations with the government of Azerbaijan, or GOAJ, by then-U.S. Senator Sam Brownback, according to a cable from the U.S. embassy in Baku.
The cable summarized a “warm and relaxed meeting” in February 2008 between Brownback, now governor of Kansas, and Azerbaijan President Ilham Aliyev.
“Senator Brownback raised a long-standing commercial case on behalf of one of his constituents,” the cable says. “Brownback noted that his constituent had reached a written agreement with the GOAJ to settle the case for USD 150 million, and said he hoped the president could instruct his staff to resolve the case.”
Aliyev agreed and said his government “would first need to sell some state property” to “raise cash for the settlement,” the cable says. That year, TeliaSonera AB, Sweden’s largest telephone company, bought coupons from an investor it later refused to identify and used them to buy a stake in Azerbaijan’s wireless carrier.
Other investors shared in a portion of O’Shaughnessy’s settlement with the Azerbaijan government.
O’Shaughnessy; Bourke’s lawyer, John Cline; and a spokesman for the Azerbaijan embassy in Washington didn’t respond to telephone calls and e-mails seeking comment.
Jennifer Queliz, a spokeswoman for U.S. Attorney Preet Bharara in New York, whose office prosecuted the case, declined to comment on it.
Sherriene Jones-Sontag, a spokeswoman for Brownback, said in an e-mailed statement that he has helped “hundreds, if not thousands of Kansans navigate federal and international governments.” She declined to comment further..
The case is U.S. v. Bourke, 05-cr-00518, U.S. District Court, Southern District of New York (Manhattan).