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A Czech financier and an employee of US insurance company AIG have been indicted by US authorities for allegedly taking part in an illegal scheme to bribe top Azerbaijan officials to buy its state oil company on the cheap.

The decision, revealed on Thursday, marks a significant step in a long-running saga believed to reach the very highest levels of the Azeri government and involve a number of high-profile US investors.

Michael Garcia, the US attorney for the southern district of New York, said Victor Kozeny, the alleged mastermind of the scheme also known as the “Pirate of Prague”, was arrested on Wednesday in the Bahamas, pending an extradition request by the US.

David Pinkerton, who was managing director of AIG Global Investment, and Frederic Bourke, a US handbag tycoon who invested money with Mr Kozeny, surrendered to the Federal Bureau of Investigation in New York yesterday.

The US authorities claim both knew of the plan to bribe senior Azerbaijan government figures, and invested on the basis of that knowledge. All three defendants were charged with conspiracy to violate the Foreign Corrupt Practices Act and related crimes.

Mr Garcia also announced on Thursday that three other individuals Thomas Farrell, an employee of Mr Kozeny's investment company Oily Rock, Hans Bodmer, a Swiss lawyer, and Clayton Lewis, a principal of Omega Advisors, a prominent New York hedge fund had previously pleaded guilty in connection with their participation in the bribery scheme.

Mr Kozeny's alleged plan, hatched in the late 1990s, was to assemble a group of investors to purchase privatisation vouchers, issued free to Azeri citizens, ahead of the planned sale of the state oil company Socar. Omega purchased $126m (€105m, £75m) of vouchers, while AIG purchased $15m, the indictment says.

Socar was to be the crown jewel of Azerbaijan's privatisation programme, and the vouchers were bought for much less than they were thought to be worth.

In the end the oil company was not sold. But any successful attempt by foreigners to take control would have clearly needed top-level approval.

The indictment charges that Mr Kozeny, acting on his own behalf and as an agent of Mr Bourke and Mr Pinkerton, “made a series of corrupt payments and promises to pay” a “senior Azeri official”, a “Socar official” and two top officials from the state property committee to push the deal through.

Haydar Aliyev, the Azerbaijan president at the time, and his son Ilham, the current president, were not named in the indictment, but it says that Socar “could only be privatised with a special decree from the president of Azerbaijan”.

It alleged Mr Kozeny arranged for jewellery worth more than $600,000 dollars to be sent from London's Asprey and Garrard to Baku on the occasion of the “senior Azeri official's birthday on May 10, 1998”. That was the date of Haydar Aliyev's 75th birthday.

Gifts included a “triangular photo frame with clock 18 carat yellow gold, mother of pearl, tourmaline and enamel,” worth more than $100,000.

Other alleged bribes included direct cash payments of millions of dollars, and the transfer of two-thirds of Oily Rocks' vouchers and options to Azeri officials. Mr Garcia described the scheme as “nothing less than the brazen attempt to steal the wealth of a sovereign nation”. The irony, according to Mark Mershon, assistant director in charge of the New York field office of the FBI, was that “it appears that corrupt Azeri officials scammed the scammers”.