This is an incredible article I just finished reading over at Fortune magazine online. I'm printing a small excerpt of it here but if you want to read the entire story you'll need to click on the link at the end of my posting.

Zdude

The Incredible Half-Billion-Dollar Azerbaijani Oil Swindle

Wherein we learn why smart players like Leon Cooperman, George Mitchell, and AIG would entrust buckets of their money to Victor Kozeny, a.k.a. the Pirate of Prague. (Hint: Can you say "greed"?)

By Peter Elkind

"You know," Viktor Kozeny announces, as he steers his twin-engine KingAir, Captain Viktor, into the blackening skies over the Caribbean, "when it gets dark and there's a haze like this, it is just like what happened to J.F.K. Jr." Kozeny and I are alone at 8,000 feet, heading back to his home in the Bahamas from a daylong joy ride to the Turks and Caicos Islands. ("We will get a hamburger," Viktor explained.) I'm seated, none too happily, in the co-pilot's chair, with night closing in fast, the Nassau airstrip still 90 minutes away, and lightning stabbing the horizon. "You cannot see anything," Viktor continues, in case I've missed the point. "You are totally blind. But don't worry," he finally adds, with a devilish grin. "What happened to Kennedy will not happen to us."

Flying with Viktor Kozeny has always been a white-knuckle ride. While he's not exactly a household name, Kozeny, 36, is notorious in financial circles as an emerging-markets buccaneer--a charming, shrewd, thoroughly ruthless fellow who finds his "opportunities" in the struggling economies of Eastern Europe. It is a reputation he established in the early 1990s, when he plundered his native Czech Republic during its painful transition to capitalism. Ever since, he has been known as the "Pirate of Prague"--a title first pinned on him by FORTUNE.

You might think that's the sort of image that would send respectable American investors running for their T-bills. Think again. It is precisely Kozeny's reputation that drew an astonishing collection of blue-chip investors to Kozeny's latest scheme, including vaunted Wall Street hedge fund manager Leon Cooperman, former Senate Majority Leader George Mitchell, and AIG, the insurance giant.

This time around, Kozeny's theater was the former Soviet Republic of Azerbaijan, one of the most byzantine, corrupt, and inscrutable nations on earth, a place where the phrase "investing risk" takes on a whole new meaning. Less than a decade into its experiment with capitalism, Azerbaijan has no stock market, no meaningful financial regulation, and a rich history of graft and cronyism. Yet it was there that the Americans, embracing Kozeny's pitch that he had the place wired, bet hundreds of millions of dollars in the belief that they were in on the deal of a lifetime. With Kozeny's help, they were going to make 20, 50, even 100 times their money in just a year or two. Kozeny may have been a pirate, but he was their pirate.

Instead, like most get-rich-quick schemes, this one collapsed--leaving the sophisticated Western investors looking like a bunch of Dubuque dentists suckered by a two-bit stock promoter. How it all happened is a wild, wondrous tale of embarrassed millionaires ("You're gonna make me look like a schmuck," says one), murky geopolitics, and common duplicity and greed.

Not surprisingly, everyone involved in the scheme is now busily trying to lay the blame elsewhere. The investors who hopped into bed with Viktor now say he seduced them. Several bluntly call him a crook. Two of the biggest participants, Cooperman's Omega Advisors and AIG, are suing him for fraud. Liens have been slapped on the $25 million London home Kozeny bought from Andrew Lloyd Webber.

Kozeny, of course, sees things differently, and in more than 20 hours of conversation with FORTUNE, he made it clear that he isn't about to take the fall alone.

Link To Full Article In Fortune Online

-- Zdude (zdude777@hotmail.com), February 28, 2000