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Viktor Kozeny ’87-’89, whose financial exploits in the Czech Republic earned him international notoriety as the “Pirate of Prague,” was indicted last Thursday on charges of stealing $182 million from the clients of an investment firm in New York.
Kozeny was charged with 15 counts of grand larceny and two counts of criminal possession of stolen property, for allegedly stealing from investment funds managed by Manhattan-based Omega Advisors, Manhattan District Attorney Robert M. Morgenthau announced.
Two of the investors—Columbia University and The Common Fund, an investment fund that manages the endowments of colleges and other non-profit organizations—lost $15 million and $4.5 million, respectively.
Kozeny, who received his bachelor’s degree in economics from Harvard, could face up to 25 years in prison if convicted.
According to the district attorney’s office and media reports, in 1998, Kozeny persuaded 15 clients managed by Omega to invest money in the prospective privatization of Azerbaijan’s state-owned oil company.
The Omega investors had hoped to gain a controlling interest in the company.
The governments of many former Soviet countries have sold state-owned property to the public, including foreign investors, through privatization vouchers and options.
When the privatization did not happen, Kozeny allegedly used $14 million of Omega’s money for personal expenses. Another $73 million is unaccounted for.
Kozeny also used $95 million of Omega’s money to buy vouchers and options he already owned. Kozeny had bought the vouchers and options for a mere $2 million—and thus made $93 million off the transaction.
The Manhattan District Attorney’s Office has started extradition proceedings to bring Kozeny—who is currently in the Bahamas—to the United States. The extensive investigation involved gathering documents and witness accounts from Eastern Europe, the Channel Islands and Switzerland, among other places.
Columbia spokesperson Katie Moore said the University is cooperating fully with the investigation.
Kozeny’s lawyer, meanwhile, defended his client’s innocence.
“Viktor Kozeny maintains that he did not defraud anyone,” said Benjamin Brafman of Brafman & Ross, P.C. “The investors were a group of very sophisticated individuals and organizations who conducted their own due diligence, and knew exactly what they were investing in, what the risks were, and these people got exactly what they bargained for.”
Kozeny, now 39 years old, is no stranger to the international limelight.
Kozeny belonged to the first group of entrepreneurs in formerly communist Eastern Europe to take advantage of the privatization of state property, making huge fortunes—sometimes by legally questionable means.
When the Czech government decided to sell shares in state-owned companies to the public, Kozeny had just come from the United States with a Harvard education and only $2,000, according to the Columbia Spectator.
At one time considered the richest man in the Czech Republic, Kozeny reportedly made around $200 million in the early 1990s when the Czech government decided to sell shares in state-owned companies to the public. Under this plan, Czech citizens could purchase vouchers that could, in turn, be traded in for shares in these companies. Kozeny persuaded around 800,000 Czechs to invest their vouchers in his “Harvard” funds, by promising a 10-fold return on their investment.
But Kozeny then disappeared—with Czech citizens’ money—reappearing in the Bahamas, earning the infamous nickname of “Pirate of Prague,” according to the Columbia Spectator.
“The transition of the Eastern European economy has obviously been bumpy, with some suspicious activities being very profitable for individuals,” said Richard Caves, professor emeritus in economics, who said he had not heard of Kozeny or his indictment. “There wasn’t a framework of law, either formal or informal, that would reliably deter people” in those former communist Eastern European countries.
Viktor Kozeny is a household name in the Czech Republic. “Ask any Czech today who Viktor Kozeny is and the answer would probably not be suitable for children,” Dita Asiedu said on Radio Prague in July. “There is no doubt that there is nothing many Czechs would like more than to see Mr. Kozeny behind bars, forever.”
International students at Harvard from the Czech Republic are familiar with his name and story.
“Everybody knows him. He’s probably the greatest robber after 1989,” Michal Dousa ’06 said. “It’s actually ridiculous that people found out about him only now.”
Dousa conceded that the Harvard name probably was a factor in Kozeny’s success.
“They trusted him even more than if he said that he studied at this small university in west Czech Republic,” he said of Czech citizens.
Indeed, Kozeny has linked himself time and again to the Harvard name.
Around a year after Kozeny graduated from Harvard, he founded an investment company called Harvard Capital and Consulting (HC&C), which provided investment opportunities and financial consulting in the former Czechoslovakia. In 1992, Kozeny told The New York Times that he used the Harvard name for his company because he has a B.A. in economics from Harvard. The Harvard tag aided the company’s ability to channel millions of dollars into the Czechoslovakian economy as it was privatizing its financial market, according to the newspaper.
Harvard released a statement around that time disavowing any connection to the company and declaring that the University never authorized the use of the Harvard name.
Vice President and General Counsel Daniel Steiner ’54 told The Crimson in 1992 that businesses that advertise under the Harvard name without permission not only take advantage of the University’s reputation but also pose a possible threat to consumers.
“What bothers us is that apparently people are being misled, as the name of Harvard has been used in [HC&C] advertising,” Steiner told The Crimson in 1992. Harvard officially registered the Harvard name as a trademark in 1990.
Kozeny’s lawyer, Brafman, said “[Kozeny] is very proud of his degree from Harvard University.”
“And once these cases are hopefully absolved in Mr. Kozeny’s favor, Harvard will have ample reason to be proud of him as well,” Brafman added.
There is a file on Kozeny at the Office of General Counsel, according to Diane Lopez, a University attorney. But the individual most knowledgeable about the matter was unavailable for comment yesterday.
Even today, Kozeny is still at least nominally tied to the University.
Dousa said that when he applied as an international student to Harvard two years ago, he saw Viktor Kozeny’s name on the list of interviewers based in various parts of the world. A department administrator at the admissions office confirmed that Kozeny is listed as a Harvard interviewer in the database. It is unclear, though, whether Kozeny conducted any interviews with prospective applicants.
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