By Lukas I. Alpert
Todd Kozel made his riches in the oil fields of Kurdistan and now will have to pay the price.
The once-jet-setting co-founder and chief executive of Gulf Keystone Petroleum is headed to prison for five years for tax evasion after years of hiding money in overseas trusts to avoid having to give it to his ex-wife in a bitter divorce.
Kozel, 55, was accused of moving millions of his shares in the company and other cash into an offshore trust in the tax haven of Jersey after his then-wife Ashley filed for divorce in 2010. The trust was set up as if it were a charity and Kozel claimed he had no control over it, but prosecutors say that was a lie.
At the same time, prosecutors say that Kozel earned $66 million in salary and stock options between 2011 and 2014 when he was fired as the oil company’s CEO, but that he failed to file any tax returns in the U.S. during that time period. Kozel should have paid $20 million in taxes for those years, according to the IRS.
Kozel co-founded Gulf Keystone /zigman2/quotes/204461001/delayed UK:GKP -1.40% in 2004. The British-based firm, which trades on the London Stock Exchange, later received the license to operate the Shaikan oil field in Iraqi Kurdistan, one of the world’s largest.
In January 2012, Kozel was ordered by the judge in the divorce case to hand 23 million shares in Gulf Keystone to his wife by the end of that month. But according to court papers, Kozel delivered the shares more than a month late via a bank in Lebanon, obscuring their origin from the trust in Jersey.
The delay cost Kozel’s ex-wife nearly $38 million due to declines in the company’s stock price, according to court papers. She later sued him to make up the difference, causing the divorce case to drag on for years more. Initially he was ordered to pay but the ruling was later overturned on appeal.
In 2013, however, Kozel and his new wife purchased a $12.75 million condominium apartment in Manhattan using money funneled from the hidden Jersey trust. Prosecutors say the deal was structured through a sham arrangement in which the apartment was acquired by an LLC to which Kozel and his wife were supposed to pay rent.
As part of the deal, the trust overpaid for the apartment by over $2 million, which the buyers then paid back to a bank account in Lithuania that was in Kozel’s new wife’s name, prosecutors said.
Messages left with attorneys for Kozel and his ex-wife weren’t immediately returned.
In court papers, Kozel admitted he had made a mistake as part of his effort to squirrel away assets from his ex-wife. He also asked the judge for leniency in sentencing because he is undergoing extensive treatment for throat cancer.
Ultimately, the judge gave Kozel the 60-month sentence the government was asking for. He was also ordered to pay the IRS $29.5 million in back taxes and penalties.
“No one is above the law,” said. Damian Williams, the U.S. attorney for the southern district of New York. “All citizens must pay their fair share of taxes.”