By NEIL HARTNELL
Tribune Business Editor
The Czech authorities’ bid to seize $22 million allegedly belonging to Lyford Cay financier, Viktor Kozeny, has been “doomed” by the defective service of court documents on him in the Bahamas.
The New York State Supreme Court, in a June 7 verdict, said this made the attempt by the Czech government and Harvard Holdings - the entity Mr Kozeny was found guilty of asset stripping in the mid-1990s - to grab proceeds from the sale of his Colorado home “a nullity”.
This newspaper previously revealed that attorneys acting for Harvard had attempted to seize the $22 million, which had been held in frozen New York bank accounts at Wells Fargo.
The funds were alleged to belong to Landlocked Shipping, a Turks & Caicos company said to be controlled by Mr Kozeny, which had purchased a luxury house in Aspen, Colorado, for $19.75 million in July 1997.
The property was subsequently sold for $24 million on June 12, 2001, with the price subsequently reduced to $22 million.
The proceeds, though, were frozen when the he US government attempted to extradite Mr Kozeny from the Bahamas to face charges of alleged money laundering and bribery relating to the privatisation of Azerbaijan’s oil industry.
The extradition bid failed, and Mr Kozeny moved quickly to unfreeze the Aspen property’s sales proceeds. The Czech government, though, was able to stall that by filing this current case, seeing it as one of the last opportunities to enforce a $410 million judgment rendered against Mr Kozeny in their courts.
However, Judge Ellen Coin said that to “convert” the Czech judgment into US law and obtain an Order ‘attaching’ it to the $22 million, the Czech government had to ‘personally serve’ Mr Kozeny with the relevant documents.
And proof of service had to be supplied to the US court within 120 days of the complaint against Mr Kozeny being filed - something that was also not complied with.
“The only proof of service filed with the court is an affidavit of service of plaintiff’s order to show cause on Kozeny by overnight mail to an address in the Bahamas,” the New York State Supreme Court’s ruling found.
“The record is otherwise lacking any indication that service of the summons and complaint was effected upon Kozeny, nor is the court aware of any authority that the requirement of service of the summons and complaint is satisfied by service of a separate motion.
“Since this defect would render the summons and complaint a nullity as against Kozeny, and effectively doom the possibility of domesticating the Czech judgment on default.”
As a result, Justice Coin said the question of whether Landlocked Shipping’s assets could be used to satisfy Mr Kozeny’s alleged debt was rendered “academic”.
Accordingly, she ruled that the Czech government’s bid to attach its judgment to the $22 million contained in the two Wells Fargo bank accounts was denied.
And Justice Coin also removed the June 4, 2012, asset freeze on the accounts, allowing Landlocked (and possibly Mr Kozeny) to immediately transfer the $22 million out of the US jurisdiction, and put it out of reach of the Czech authorities.
Tribune Business can confirm there were issues over Mr Kozeny’s serving, as the court documents were sent to him ‘care of’ Cayside Trust.
That is the Lyford Cay-based entity that manages the assets of the Izmirlian family, the $2.6 billion Baha Mar project’s owners. The Izmirlians, Cayside Trust and its officers/staff have absolutely no connection with, and nothing to do with, Mr Kozeny.
The Czech authorities had alleged that Mr Kozeny was a ‘shadow’ owner of Landlocked Shipping, owning none of its shares but acting as its ‘managing mind’, and directing all its operations through third parties.
However, even had the service of court documents not been defective, Justice Coin said she was “not persuaded” that Harvard Holdings had “established the probability of successful conversion of the Czech judgment, which would entitle it to an order of attachment”.
Harvard Holdings was allegedly founded by Mr Kozeny in 1991 to acquire the vouchers issued to Czech citizens that could be exchanged for shares in privatised state assets.
He allegedly convinced one million Czechs to hand over their vouchers to Harvard, which was supposed to invest them on their behalf.
Eventually, Mr Kozeny amassed enough vouchers to control 15 per cent of the Prague Stock Exchange.
The vouchers eventually peaked at $1.4 billion in value in December 1994, more than 30 times their original value, but Mr Kozeny then “embezzled funds” via 98 transactions - causing loss to thousands of Czechs.
The Prague courts ultimately found him guilty in July 2011, issuing the $410 million judgment. Harvard is alleging that Peak House was bought with funds taken from Czech investors.
“Kozeny fled the US in 1999 for his estate in the Bahamas and has not left the Bahamas since,” Harvard previously alleged in its court papers.
“Kozeny has refused to face justice and has fought extradition to answer for his actions.
“To date, defendant Kozeny has evaded enforcement of the Prague judgment by maintaining his residence on a $29 million estate in the Bahamas. The Bahamas has not complied with Czech requests for the extradition of Kozeny.”