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Saturday, July 07, 2007

Hedge fund settles Azeri charges

06 July 2007 Upstream OnLine - The US government said today it had agreed not to prosecute Omega Advisors, a $6 billion hedge fund, over its role in an alleged scheme to bribe Azeri officials and gain control of the country's state oil company. Omega will not be prosecuted for any crimes related to its investment in a privatisation programme in Azerbaijan, the US Attorney's office in Manhattan said in a statement, Reuters reported. Omega will forfeit $500,000 and will continue to co-operate with the probe. The agreement ends uncertainty over the case for Omega, which was founded by Leon Cooperman, a former general partner of Goldman Sachs. It also comes after recent setbacks for prosecutors in the case, which includes allegations that Czech investor Viktor Kozeny sent "planeloads of cash" into Azerbaijan in the late 1990s to buy a controlling interest in the former Soviet republic's state oil company, Socar. Omega invested more than $100 million in the privatisation programme in 1998 through a co-investment agreement with two companies controlled by Kozeny, prosecutors said. Clayton Lewis, a former Omega employee who was the hedge fund's point of contact on the Azeri investment, has admitted he knew about Kozeny's alleged arrangements before he invested on Omega's behalf, prosecutors said. Lewis pleaded guilty in February 2004 to charges of violating the Foreign Corrupt Practices Act and conspiracy to violate the act, prosecutors said. Omega lost all of its investment and Socar has not yet been privatised, prosecutors said. Omega substantially wrote down its investment in 1998. It has sued Kozeny and Lewis. "I am happy that the government has understood that Omega has acted appropriately since it learned of Mr. Lewis' improper conduct," said Omega's lawyer, Robert Anello. In a letter to investors, Cooperman said he was pleased "the saga relating to Omega's 1998 investment in the privatisation programme in Azerbaijan has come to an end." In June, a federal judge threw out most of the charges against two defendants in the case - David Pinkerton and Frederic Bourke - saying the indictment was filed too late. Pinkerton was managing director of AIG Global Investment, a subsidiary of American International Group, while Bourke was the principal shareholder in Blueport International, which allegedly invested in a company involved in the scheme, according to the ruling last month. The two still face charges of making false statements. The judge has set a conference for 17 July. Kozeny was released on bail in April from a Bahamas prison where he was sent in 2005 to await extradition to the US.

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