Earlier today the Second Circuit Court of Appeals issued a decision (here) affirming Frederic Bourke’s 2009 conviction of conspiring to violate the FCPA and the Travel Act and of making false statements.
The Bourke appeal was principally based on knowledge issues which present narrow, factually unique issues. Nevertheless the Second Circuit’s holding on conscious avoidance is noteworthy in terms of FCPA jurisprudence. Essentially the court held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial evidence, is sufficient to warrant an FCPA-related charges. The message to international investors should be clear, if a potential investment results in sleepless nights and fear of asking specific direct questions because of the answers you might receive, there is probably better uses for your money.
Brian Whisler (an FCPA practitioner at Baker & McKenzie – see here) who has been following the case offered the following. “Despite the considerable speculation surrounding this case, today’s Second Circuit opinion affirming Mr. Bourke’s conviction came with little surprise, as the standard on review is so heavily weighted in favor of the government when defendants challenge the sufficiency of the evidence underlying their convictions. The Court found that a rational juror could infer from the totality of the evidence that Mr. Bourke deliberately avoided confirming his suspicious aroused by multiple red flags signaling corruption and that the same evidence could establish his knowledge about the crime. Given DOJ’s aggressive pursuit of individual executives, this precedent is instructive, particularly for purposes of defining willful blindness.”
Before turning to the Second Circuit’s decision, a bit of background. The Bourke case is arguably the most complex and convoluted case in the history of the FCPA and focuses on the conduct of Bourke and others – including most notably Viktor Kozeny (who is enjoying life in the Bahamas) – in a bribery scheme connected to the privatization of the Azerbaijan state-owned oil company, SOCAR. The case largely focused on the FCPA’s knowledge element and whether Bourke, as an investor, had sufficient knowledge of the bribery scheme.
As noted in this previous post when Bourke was sentenced to 366 days in November 2009, the case involved a nearly decade long investigation that spanned the globe, dismissal of FCPA substantive charges on statute of limitations grounds, reinstatement of the FCPA substantive charges, a superseding indictment which then dropped the FCPA substantive charges and a six week jury trial. For additional background on the case, see this superb piece by Andrew Longstreth that appeared in the American Lawyer.
Bespeaking the complex nature of the case, in November 2009 when Judge Shira Scheindin (S.D.N.Y.) sentenced Bourke she stated as follows. “After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”
A previous post (here) outlined Bourke’s appeal.
The Second Circuit’s opinion begins as follows. “On appeal, Bourke vigorously attacks his conviction on several fronts, including the (1) correctness of the jury instructions given, (2) the propriety of certain evidentiary rulings made by the district court, and (3) the sufficiency of the evidence supporting the false statements conviction. For the reasons given below, we affirm.”
After a detailed discussion of the facts, the Court focused on the jury instructions and stated as follows. “Bourke challenges the jury instructions on four primary grounds. First, he argues the district court erred in refusing to instruct the jury that it needed to agree unanimously on a single overt act committed in furtherance of the conspiracy. Second, he argues the district court improperly charged the jury on conscious avoidance because (1) there was no factual basis for such a charge; and (2) the government waived its reliance on the conscious avoidance theory. Third, he argues the district court erred by failing to instruct the jury that the government needed to prove Bourke acted “corruptly” and “willfully” to sustain a conviction on FCPA conspiracy. Finally, he argues the district court erred in failing to give the jury Bourke’s proposed good-faith instruction.”
As to overt acts, the Court held that “the jury need not agree on a single overt act to sustain a conspiracy conviction.” The court stated as follows. “We conclude, therefore, that although proof of at least one overt act is necessary to prove an element of the crime, which overt act among multiple such acts supports proof of a conspiracy conviction is a brute fact and not itself element of the crime. The jury need not reach unanimous agreement on which particular overt act was committed in furtherance of the conspiracy.”
As to conscious avoidance, the Court disagreed with Bourke’s argument that a conscious avoidance charge lacked a factual predicate and stated as follows. “While the government’s primary theory at trial was that he had actual knowledge of the bribery scheme, there is ample evidence to support a conviction based on the alternate theory of conscious avoidance. The testimony at trial demonstrated that Bourke was aware of how pervasive corruption was in Azerbaijan generally. Bourke knew of Kozeny’s reputation as the “Pirate of Prague.” Bourke created the American advisory companies to shield himself and other American investors from potential liability from payments made in violation of FCPA, and joined the boards of the American companies instead of joining the Oily Rock board. In so doing, Bourke enabled himself to participate in the investment without acquiring actual knowledge of Oily Rock’s undertakings. The strongest evidence demonstrating that Bourke willfully avoided learning whether corrupt payments were made came from tape recordings of a May 18, 1999 phone conference with Bourke, fellow investor Friedman and their attorneys, during which Bourke voiced concerns about whether Kozeny and company were paying bribes. […] Finally, Bourke’s attorney testified that he advised Bourke that if Bourke thought there might be bribes paid, Bourke could not just look the other way. Taken together, a rational juror could conclude that Bourke deliberately avoided confirming his suspicions that Kozeny and his cohorts may be paying bribes.”
The Court further stated as follows. “It is not uncommon for a finding of conscious avoidance to be supported primarily by circumstantial evidence. Indeed, the very nature of conscious avoidance makes it unlikely that the record will contain directly incriminating statements. Just as it is rare to find direct record evidence of an employer stating, “I am not going to give you a raise because you are a woman,” it is highly unlikely a defendant will provide direct record evidence of conscious avoidance by saying, “Stop! I think you are about to discuss a crime and I want to be able to deny I know anything about it!” Here, the evidence adduced by the government at trial suffices to support the giving of a conscience avoidance charge.”
The Court specifically rejected Bourke’s argument that the conscious avoidance charge improperly allowed the jury to convict him based on negligence, rather than based on evidence that he avoided learning the truth. The Court stated as follows. “[T]he record contains ample evidence that Bourke had serious concerns about the legality of Kozeny’s business practices and worked to avoid learning exactly what Kozeny was doing.” Moreover, the Court stated that the “district court specifically charged the jury not to convict based on negligence [and] there is no reason to suspect that the jury ignored that instruction.”
As to mens rea, the Court found no error in the district court’s jury instruction that to convict the jury had to find that Bourke knew of the conspiracy’s object and that Bourke intended for that object to be accomplished. The Court found that “the district court properly instructed the jury that it must find Bourke knowingly entered into a conspiracy that had the object of corruptly and willfilly bribing foreign officials and that Bourke intended to aid in achieving this object.” In so holding, the Court stated that Bourke’s requested jury instruction that would have required the jury to “find Bourke willfully and corruptly joined a conspiracy to willfully and corruptly bribe foreign governments” was an “absurd result unsupported by the law.”
As to Bourke’s proposed good faith instruction, the Court stated as follows. “Even assuming arguendo that Bourke’s proposed instruction was legally correct with an adequate basis in the record, his argument fails because the theory was effectively presented elsewhere” in the jury instructions and the “failure to give a specific good faith charge does not require reversal.”
Does the Second Circuit’s decision mark the end of the road for Bourke? Perhaps not, his request for a new trial – based on the theory that a key witness offered false testimony – is still pending. The Second Circuit’s decision does not address Bourke’s pending request, but in light of its decision, it is unlikely that Judge Scheindin will grant Bourke’s motion.