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United States Attorney for the Southern District of New York and the United States Department of Justice, Fraud Section ("these Offices") will not criminally prosecute Omega Advisors, Inc. and its subsidiaries and affiliates (collectively, "Omega") for any crimes (except for criminal tax violations, as to which these Offices cannot and do not make any agreement) related to an investment Omega and an investment fund named Pharos Capital Management, L.P. made in a privatization program in Azerbaijan, as described in Indictment 05 Cr. 518 (SAS), in Superseding Information S 1 03 Cr. 930 (NRB), a
Judges Comments
United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE
JULY 6, 2007
CONTACT: U.S. ATTORNEY’S OFFICE
YUSILL SCRIBNER,
REBEKAH CARMICHAEL
PUBLIC INFORMATION OFFICE
(212) 637-2600
DOJ
DEAN BOYD
OFFICE OF PUBLIC AFFAIRS
(202) 514-2007
FBI
NEIL DONOVAN, JIM MARGOLIN
PUBLIC INFORMATION OFFICE
(212) 384-2715, 2720
U.S. ANNOUNCES SETTLEMENT WITH HEDGE FUND OMEGA
ADVISORS, INC. IN CONNECTION WITH OMEGA’S
INVESTMENT IN PRIVATIZATION
PROGRAM IN AZERBAIJAN
MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, ALICE S. FISHER, Assistant
Attorney General in Charge of the Criminal Division, and MARK J.
MERSHON, the Assistant Director In Charge of the New York Field
Office of the FBI, today announced a non-prosecution agreement
(the "Agreement") with OMEGA ADVISORS, INC. relating to OMEGA’s
investment in a privatization program in Azerbaijan alongside of
Czech national VIKTOR KOZENY. OMEGA acknowledged in the
Agreement that CLAYTON LEWIS, one of its former employees, had
learned, prior to OMEGA’s investment, that KOZENY had entered
into arrangements with some officials of the government of
Azerbaijan that gave those officials a financial interest in the
privatization of certain Azeri industries.
The Agreement provides that OMEGA will not be
prosecuted for any crimes (except for criminal tax violations, as
to which we cannot and do not make any agreement) related to its
participation in this investment. The Agreement further provides
that OMEGA will civilly forfeit $500,000 and will continue to
cooperate with the Government in connection with its
investigation and prosecution of this matter.
As described in a statement of facts that is part of
the Agreement entered into today, the Republic of Azerbaijan
instituted a program in the mid-1990s to privatize certain of its
state-owned industries, and the Azeri government issued freely-
tradable vouchers to its citizens which could be bid for shares
of industries to be privatized. Certain industries, including
SOCAR, the State Oil Company of the Azerbaijan Republic, could
only be privatized if the President of Azerbaijan issued a
special decree. Beginning in the summer of 1997, KOZENY invested
heavily in the Azeri privatization program through two companies
he controlled, Oily Rock Group Ltd. ("Oily Rock") and Minaret
Group Ltd. ("Minaret"). KOZENY also recruited individual and
institutional investors to invest in the privatization program,
including OMEGA. LEWIS was OMEGA’s point of contact on the Azeri
investment.
LEWIS pleaded guilty before United States District
Judge NAOMI REICE BUCHWALD on February 10, 2004 to a two-count
superseding Information charging him with conspiracy to violate
the Foreign Corrupt Practices Act ("FCPA") and violating the
FCPA. During his guilty plea, LEWIS admitted that (1) in March
1998, KOZENY informed him that KOZENY had entered into
arrangements with some Azeri officials that gave those officials
a financial interest in the privatization of certain industries;
and (2) LEWIS entered into the investment, on behalf of OMEGA,
with the understanding that LEWIS was taking advantage of the
arrangements that KOZENY had already set up. OMEGA invested a
total of more than $100 million in the Azeri privatization
program in the spring and summer of 1998 through a "co-investment
agreement" with Oily Rock and Minaret. Omega lost all of its
investment, and to date privatization of SOCAR has not occurred.
The investigation into this matter is being handled
jointly by the United States Attorney’s Office for the Southern
District of New York (the "Office"), the Fraud Section of the
United States Department of Justice (the "Fraud Section"), and
the New York Office of the Federal Bureau of Investigation. The
Office and the Fraud Section’s decision to enter into the
Agreement was guided by the factors set forth in the Department
of Justice’s "Principles of Federal Prosecution of Business
Organizations," as amended December 12, 2006. Among other
factors, the Office and Fraud Section’s decision took account of
(1) OMEGA’s cooperation with the Government’s investigation into
the foreign bribery scheme; (2) OMEGA’s commitment to continue to
provide cooperation; (3) OMEGA’s remedial actions, including its
implementation of a compliance policy regarding the FCPA; (4) the
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absence of any history of similar conduct by OMEGA; and (5) the
prosecution of LEWIS, who is awaiting sentencing. The Office and
Fraud Section also considered the consequences that a criminal
Indictment could have upon the ongoing operations and employees
of OMEGA. In light of the above, and after careful balancing of
all the factors in the Principles of Federal Prosecution Business
Organizations, the Office and Fraud Section have concluded that
criminal prosecution of OMEGA is not necessary to serve the
public interest.
Mr. GARCIA praised the investigative efforts of the FBI
in this case.
Assistant United States Attorney JONATHAN S. ABERNETHY
and Fraud Section Assistant Chief ROBERTSON PARK are in charge of
the investigation.
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