Friday Roundup
Writer’s cramp at the DOJ, the well fed U.K. Ministry of Defence officials, and a potential cost-savings due diligence tool … it’s all here in the Friday roundup.
Writer’s Cramp at the DOJ?
When Charles Paul Edward Jumet was sentenced in April to 87 months in prison for FCPA and related offenses, the DOJ issued a press release the same day (see here).
When John Warwick was sentenced in June to 37 months in prison for conspiracy to violate the FCPA, the DOJ issued a press release the same day (see here).
When Juan Diaz was sentenced in July to 57 months in prison for conspiracy to violate the FCPA, the DOJ issued … you got it … a press release the same day (see here).
All three instances represented, in FCPA terms at least, a harsh sentence.
So what happens when a sentencing judge rejects the DOJ’s ten year sentencing recommendation and instead sentences the defendants to six months in prison?
Well, let’s just say that the DOJ appears to have experienced a sudden case of writer’s cramp.
As indicated in this prior post, on August 12th, U.S. District Court Judge George Wu of the Central District of California rejected the DOJ’s requested ten year prison sentence for Gerald and Patricia Green and sentenced the couple to six months in prison.
It’s not like the DOJ hasn’t been issuing press releases throughout this case (see here and here), but apparently when a judge materially disagrees with the DOJ, it is time to stop the presses.
Or perhaps it was a mere oversight in which case the DOJ will soon issue a release.
Well Fed U.K. Ministry of Defence Officials
The Guardian recently ran a story that caught my eye.
Written by Rob Evans, the article (see here) details how BAE Systems “regularly wined and dined mandarins and senior military officers.”
The article also claims that BAE Systems “frequently gives jobs to politicians and civil servants in a ‘revolving door’ after they have left public service, including officials who negotiated multi-million pound deals with the company” and that “MoD secretly lobbied to end the Serious Fraud Office’s investigation into allegations that BAE bribed foreign politicians and officials to secure large contracts.”
An MoD spokesman is quoted in the article as saying “It is vital for the MoD to maintain a close relationship with the defence industry to ensure that we have the best equipment for our armed forces. All the meetings are subject to strict guidelines.”
Due Diligence Co-Op Programme
I don’t often highlight the latest in FCPA compliance services, but Red Flag Group’s new offering seemed to make sense to me – plus it is a service that would seem to lead to cost savings for companies.
The ad (here) asks a simple question: “tired of paying full price for the same due diligence report that another company ordered just a few months ago?”
If you answered yes to this question, you may be interested in Red Flag Group’s Due Diligence Co-Op Programme, also explained in the ad.
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A good weekend to all.
Outlining Bourke’s Appeal
The DOJ recently filed its reply brief (here) in Frederic Bourke’s appeal.
A prior post (here) summarized the FCPA related issues in Bourke’s brief and this post summarizes the DOJ’s reply brief.
The DOJ begins with this paragraph:
“The evidence at trial established that Bourke, a successful entrepreneur and multi-millionaire, knowingly backed rogue investor Viktor Kozeny in a corrupt plan to purchase the state-owned Azerbaijani oil industry, in secret partnership with the president of Azerbaijan, Heydar Aliyev, and his family. The corrupt plan included the payment of bribes to Aliyev and other officials.”
The DOJ states – “[a]t some point, Bourke learned about Kozeny’s business success and strategies from a December 1996 Fortune magazine article.” The brief states that the article “detailed Kozeny’s insider trading, purchase of state secrets from a government official, and other fraudulent activity.” According to the DOJ, “[h]aving read the article and discussed it with his lawyers, Bourke was aware of Kozeny’s questionable business practices; but Bourke was impressed by the outsized profits Kozeny generated in this scheme, and, as Bourke would later tell a prospective investor, Kozeny had not actually been convicted of a crime.”
Bourke’s trial principally focused on his investments in Oily Rock, a vehicle the government maintains was used to funnel bribe payments to Azerbaijan officials to ensure that the officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that only the investors, including Bourke, Kozeny and others could win.
The DOJ states that “Bourke made his initial investment in Oily Rock without directing any of his many lawyers to conduct due diligence.”
According to the DOJ:
“Bourke’s interest in the investment was motivated by his knowledge of the corrupt arrangement. Because Bourke knew of the payments to Azerbaijani officials, Bourke demonstrated an assured confidence in the success of the privatization, even though most of the investors who were not privy to the details of the conspiracy viewed it as extremely risky. The inherent risk in the investment arose from the fact that the privatization of SOCAR required a presidential decree.”
The DOJ nevertheless acknowledges that many others invested, directly or indirectly, in Oily Rock including former U.S. Senator George Mitchell and other individuals, institutional investors and hedge funds, AIG and Columbia University.
Bourke’s appellate brief argued that the district court “committed a series of errors that crippled Bourke’s mens rea defense.”
Below is a summary of Bourke’s arguments along with the DOJ’s response as set forth in its reply brief.
Bourke
“The district court improperly instructed on conscious avoidance, despite the absence of evidence that Bourke deliberately avoided knowledge of Kozeny’s bribes.” According to Bourke, this instruction was error “because there was no evidence that Bourke deliberately avoided learning about Kozeny’s bribery.” Bourke states that the conscious avoidance instruction “was particularly damaging because the government presented evidence and argued that Bourke failed to exercise adequate due diligence, thus exacerbating the risk inherent in the conscious avoidance instruction that the jury would convict for negligence or recklessness.
DOJ
“There was an ample factual basis for a conscious avoidance charge in this case. To be sure, the Government’s principal theory at trial was that Bourke had actual knowledge of the bribery scheme. But the jury easily could have found, in the alternative, that Bourke was aware of a high probability of the existence of corrupt arrangements, yet deliberately avoided confirming that fact. Such a finding would have been supported, by, among other things, the following evidence:
• Bourke was aware of the high level of corruption in Azerbaijan generally.
• Bourke had read a Fortune magazine article that described Kozeny’s reliance on illegal business practices, such as insider trading, purchase of state secrets from a government official, and fraud, to accomplish the goals of a privatization scheme. This article alerted Bourke that there was a high probability that Kozeny’s latest scheme involving Azerbaijan also included corrupt arrangements, such as bribe payments or offers to pay bribes.
• Bourke defended Kozeny by stating that he had not actually been convicted of a crime.
• Bourke expressed concern to other investors and their attorneys that Kozeny and his employees were paying bribes.
• Bourke proposed the formation of separate companies affiliated with Oily Rock and Minaret to shield Bourke and other American investors from liability from any corrupt payments.
• Bourke played a role in coordinating United States medical treatments, combined with tourism and shopping excursions, for Azerbaijani officials.
From these facts, among others, a rational juror could have concluded that Bourke was aware of a high probability of the existence of corrupt arrangements, yet deliberately avoided confirming that fact. Accordingly, Bourke is wrong when he suggests that a conscious avoidance was inappropriate because ‘the trial record contains no evidence that Bourke ‘decided not to learn’ about Kozeny’s bribery.’ In fact, a conscious avoidance instruction was particularly appropriate in this case, because Bourke’s corporate attorney had actually cautioned him that, if he thought there might be bribes paid, he could not just look the other way.”
“Bourke’s assertion that the conscious avoidance instruction allowed the jury to convict on a negligence theory is mistaken. To the contrary, the District Court told the jury that it could not find Bourke guilty merely because he was negligent. The Government did not argue that the jury should convict because Bourke was negligent in failing to ask his lawyers to conduct due diligence. Rather, the Government argued that Bourke refrained from asking his lawyers to conduct due diligence either because he was consciously avoiding learning about the bribes or because he did not want his lawyers to learn the true facts of his corrupt investment.”
“In sum, a rational juror could have concluded based on, among other things, Bourke’s close relationship to Kozeny and other co-conspirators, Bourke’s understanding of the Azerbaijan investment and the Azerbaijani government, and Bourke’s previously expressed concerns about Kozeny’s paying of bribes, that Bourke was aware of a high probability that Kozeny was paying bribes but deliberately avoided confirming that fact. Accordingly, the District Court properly instructed the jury on the doctrine of conscious avoidance.”
“Even if the District Court erred in instructing the jury on the doctrine of conscious avoidance (and it did not), the error would provide no basis for vacating Bourke’s conviction. This Court has repeatedly ruled that a conscious avoidance instruction is harmless in cases where, as here, there was sufficient evidence of the defendant’s actual knowledge to support the jury’s verdict.”
“Moreover, conscious avoidance was not a prominent feature of the Government’s arguments to the jury. Although the Government did refer to evidence of Bourke’s conscious avoidance, the Government’s primary argument was that Bourke had actual knowledge of the bribes.”
Bourke
The district court erred in admitting testimony about the due diligence performed by Texas Pacific Group (“TPG”), an investment fund that did not make the same investment as Bourke, because its lawyers advised of the FCPA risk.
According to Bourke, because he knew nothing about their work, their testimony was irrelevant to his state of mind particularly since the results were never shared or communicated with him.
Bourke states that “the government offered the testimony […] solely as a contrast with the comparatively skimpy inquiry that Bourke and his lawyers performed” and that this testimony “increased the risk, created by the conscious avoidance instruction and heightened by the government’s closing, that the jury would convict Bourke based on his negligence or recklessness — what he should have known, rather than what he actually knew.”
Bourke further argues that having admitted the TPG testimony, “the district court should at least have permitted Bourke to present the contrasting testimony” of the head of investments for Columbia University that would have established that “Columbia invested $15 million with Kozeny in Azeri privatization after due diligence comparable to Bourke’s.”
According to Bourke, this excluded testimony “would have rebutted the government’s claim that his lack of due diligence compared to TPG established his culpability.”
Bourke argues that “once the district court permitted the government to present TPG’s due diligence as a benchmark for measuring [his] inquiry, fairness demanded that [he] be allowed to present the contrasting picture of Columbia’s due diligence, which resembled his own.”
DOJ
“The testimony of Wheeler and Rossman [individuals who conducted due diligence for potential Oily Rock investor David Bonderman of TPG] was not offered to show Bourke was negligent; the purpose was to show that Kozeny had not concealed evidence of the corrupt arrangements from potential investors in Oily Rock. Given that Bourke was much closer to Kozeny than Bonderman was, this was important circumstantial evidence of Bourke’s knowledge. As such, the testimony was relevant and appropriately admitted by the District Court.”
“To conduct due diligence on the Oily Rock investment, at Kozeny’s invitation, Wheeler traveled to Baku with Bourke and several other potential investors; together, they toured Kozeny’s operations and were introduced to Azerbaijani government officials. Based on what she saw during her visit and her assessment that the investment was “risky [in] nature”, Wheeler and Bonderman brought in TPG’s outside counsel, Cleary Gottlieb, to perform due diligence. Rossman testified that, in 1998, he was a Cleary Gottlieb attorney. During that time, he was asked to conduct due diligence on the Oily Rock investment for TPG. As a part of due diligence, Rossman met with Bodmer at Bodmer’s law offices. During this meeting, Bodmer provided Rossman with various documents related to the Oily Rock investment, and Bodmer and Rossman discussed various details regarding the investment, including the involvement of Azerbaijani investors. Based on his review of documents, his understanding of the investment thesis, and Kozeny’s reputation, which he researched from news coverage, Rossman concluded that this proposed investment could violate the FCPA, and he advised his client not to make the investment. TPG did not invest in Oily Rock.”
“… Wheeler and Rossman’s testimony was appropriately admitted, because Bourke was exposed at minimum to the same sources of information as Wheeler and Rossman — Wheeler and Bourke took the same factfinding trip to Baku in January 1998, and Rossman, like Bourke, learned of the investment structure from Bodmer. Accordingly, this testimony was probative of Bourke’s knowledge.”
“… the District Court’s decision to admit Wheeler and Rossman’s testimony was entirely appropriate. Moreover, given the volume of direct and circumstantial evidence of Bourke’s knowledge of the conspiracy’s objectives, any conceivable error was harmless.”
“Bourke also contends that the District Court erred in barring the testimony of Bruce Dresner, who served as Columbia University’s Vice President for Investments in 1998, and, in that capacity, based on representations by Omega’s Clayton Lewis and Leon Cooperman, recommended that Columbia invest $15 million in privatization vouchers through Omega. Bourke complains that, although the Government was permitted to call Wheeler and Rossman to contrast their due diligence with Bourke’s, he was not permitted to contrast his due diligence with Columbia’s. The comparison is inapt. Unlike Wheeler and Rossman, who testified about a potential investment in Oily Rock itself, Columbia University was a potential investor in Omega, which was merely planning to invest alongside Oily Rock. The District Court did not abuse its discretion in excluding this proposed testimony.”
“The District Court properly precluded Dresner’s testimony because it was not relevant. As the District Court stated, Dresner’s state of mind “has nothing to do with the defendant on trial.” Unlike other defense witnesses and Government witnesses who were present in Baku with Bourke to consider an investment in Oily Rock and therefore possessed relevant information regarding Bourke’s knowledge, Dresner had no contact with Bourke and was considering investing in Omega, not Oily Rock. Dresner never traveled to Azerbaijan to investigate the investment opportunity, relying instead on the recommendation of Omega. Dresner never met Kozeny, Farrell, or Bodmer — the individuals who discussed the FCPA violations with Bourke.”
“In addition, Dresner’s testimony would not have been particularly helpful to Bourke, and therefore any error in excluding the testimony would have been harmless. Notwithstanding Dresner’s exclusion, Bourke offered evidence through several Government and defense witnesses that Columbia University had invested in the same project, and there was no suggestion in any of that testimony or in arguments that Columbia University was aware of bribes or was prosecuted. Thus, Bourke was able to establish that some investors in the Azerbaijani vouchers were not aware of the bribes. Had Dresner actually testified, he would have revealed that Columbia and Bourke were not similarly situated and that Columbia had much less information about the investment than Bourke did.”
“In sum, the District Court acted within its discretion in excluding Dresner’s testimony, and this ruling does not warrant a new trial.”
Bourke
The district court “refused to instruct that conviction for conspiracy requires the same mens rea as the underlying FCPA offense — meaning (among other things) a bad purpose to disobey or disregard the law.”
According to Bourke, “the district court compounded its error in giving the conscious avoidance instruction by rejecting [his] requested instruction [as to the conspiracy charge] that the government had to prove that he acted corruptly and willfully.”
Bourke argued that “when the district court turned to the mens rea required for the conspiracy offense, rather than for a substantive FCPA offense, it omitted the requirement that the defendant act corruptly” and that this “watering-down of the mens rea requirement for the conspiracy charged […] undermined [his] defense, which rested on his state of mind.”
DOJ
“Bourke did not lodge this objection in this District Court, and therefore, this part of the charge is reviewed for plain error. The District Court’s mens rea instruction was correct and was certainly not plainly erroneous.”
“The District Court instructed the jury on all the elements of a substantive FCPA violation, including the requirement that the defendant act “willfully” and “corruptly,” terms which the Court defined for the jury.”
“The District Court’s charge encompassed the mens rea elements of the FCPA and was not plainly erroneous. The “word ‘corruptly’ in the FCPA signifies . . . a bad or wrongful purpose and an intent to influence a foreign official to misuse his official position. But there is nothing in the word or any thing else in the FCPA that indicates that the government must establish that the defendant in fact knew that his or her conduct violated the FCPA to be guilty.”
“The District Court’s extensive instructions on mens rea included the instruction that Bourke had to act “with the specific intention of furthering [the conspiracy’s] business or objective” and “for the purpose of furthering the illegal undertaking.” It is simply not possible to conspire to act corruptly without acting corruptly.”
“Finally, Bourke failed to raise this highly abstract objection during any of the several conferences on the jury charge.”
“Accordingly, the charge is subject to review only for plain error. There was no error, much less plain error, in this case.”
Bourke
The district court “rejected Bourke’s proposed good faith instructions, even though [he] produced ample evidence to warrant the instructions and no other instruction covered the point.”
Bourke argued that his proposed instruction “accurately reflected the principle that a defendant’s good faith belief that he acted lawfully negates the mens rea for specific intent offenses.”
While Bourke concedes that his efforts to investigate the investment “were not as extensive” as others, his efforts “suffice for a good faith instruction.” Because the case turned on his state of mind, Bourke states that “there is no doubt that the good faith defense, if accepted by the jury, would have produced an acquittal.”
DOJ
“Bourke’s contention is without merit. A separate good faith instruction was not necessary in this case, as the relevant jury instructions effectively communicated the essence of a good faith defense in its discussion of the elements of knowledge and willfulness.”
“Indeed, the District Court’s instructions that an FCPA violation required a defendant to act “with a bad purpose to disobey or disregard the law” and that the Government could not meet its burden of proof by showing that the defendant’s actions were the result of “mere negligence or some other innocent explanation” captured the concepts identified in Bourke’s proposed charge — that Bourke could not be convicted of Count One if he believed he “was acting properly in connection with the matters alleged in [Count One], even if he was mistaken in that belief, and even if others were injured by his conduct.” […] Thus, the good faith instructions Bourke requested were “effectively presented elsewhere in the charge.” Accordingly, the District Court’s decision not to deliver a separate good faith charge was appropriate and does not provide a basis for a new trial.”
Bourke
“Any one of the errors concerning [his] knowledge of Kozeny’s bribes and his specific criminal intent, standing alone, warrants reversal” and if any one error is harmless in isolation, then their “cumulative effect profoundly damaged [his] defense.”
DOJ
“Bourke contends correctly that the cumulative effect of errors that are individually harmless can cast doubt upon the fairness of a conviction. For the reasons set forth above, there were no such errors. Accordingly, Bourke’s “cumulative effect” argument provides no basis for granting a new trial.”
Technip Joins the Bonny Island Bribery Club
A French company bribes Nigerian foreign officials with the end result being $338 million paid into the United States treasury.
Welcome to the sometimes wacky world of Foreign Corrupt Practices Act enforcement. Except in this case, the end result is not so wacky because the French company, Technip (see here) was a U.S. issuer, and thus subject to the FCPA, because, between August 2001 and November 2007, it had American Depository Shares registered with and listed on the New York Stock Exchange. In addition to being an Issuer subject to the FCPA, “Technip and other members of the joint venture [described below] routinely made use of the U.S. mails and of U.S. common carriers, and of other instrumentalities of U.S. interstate commerce” including improper payments “routed through banks in New York.”
The Technip FCPA enforcement action has been anticipated since February when the company (see here) foreshadowed the pending settlement.
Yesterday, the DOJ and SEC announced the settlement. It includes payment of a $240 criminal penalty pursuant to a DOJ deferred prosecution agreement and payment of $98 million in disgorgement and prejudgment interest pursuant to a settled SEC civil complaint.
The below post summarizes the DOJ release (to my knowledge the DOJ deferred prosecution agreement and criminal information are not yet publicly available) and the SEC settled civil complaint.
DOJ
The DOJ release (here) states that Technip “has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts […] to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, [contracts that] were valued at more than $6 billion.”
According to the release, “Technip, Kellogg Brown & Root Inc. (KBR) (see here for the prior FCPA enforcement action), and two other companies were part of a four-company joint venture that was awarded four EPC contracts.”
The release further states that “Technip authorized the joint venture to hire two agents, Jeffrey Tesler (see here for the criminal indictment) and a Japanese trading company, to pay bribes to a range of Nigerian government officials, including top-level executive branch officials, to assist Technip and the joint venture in obtaining the EPC contracts. According to the release, “at crucial junctures preceding the award of EPC contracts, a senior executive of Technip, KBR’s former CEO, Albert “Jack” Stanley (see here and here for the prior FCPA enforcement action), and others met with successive holders of a top-level office in the executive branch of the Nigerian government to ask the office holders to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials.” According to the release, “the joint venture paid approximately $132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company during the course of the bribery scheme” and that “Technip intended for these payments to be used, in part, for bribes to Nigerian government officials.”
As has become the norm in corporate FCPA prosecutions, Technip will not be required to plead guilty to anything as the criminal charges (one count of conspiracy and one count of violating the FCPA), while filed, will be deferred pursuant to two-year deferred prosecution agreement.
In a press release (see here) Technip Chairman and CEO, Thierry Pilenko said:
“The final agreement with the US authorities, completely in line with the road map that we laid out in February, puts this legacy story behind us and enables us to focus on continuing to develop Technip’s business. We stand by Technip’s commitment to carrying out its business activities ethically and according to both the spirit and letter of the law worldwide. The Board of Directors of Technip and its management are strongly committed to the continued enhancement of our internal compliance policies and processes.”
Technip’s release further states:
“The DOJ investigation of Technip was resolved through a deferred prosecution agreement, in which the Department of Justice agreed not to pursue a prosecution of Technip in return for Technip’s agreement to undertake a variety of steps during the next two years, including maintaining and enhancing its compliance program and cooperating with the DOJ. Technip agreed to pay USD 240 million to the DOJ in eight equal installments of USD 30 million over the next two years. Technip will retain a French national, approved by the Department of Justice, to serve as an independent corporate monitor, who will be chiefly responsible for reviewing Technip’s compliance initiatives and recommending improvements.”
Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division stated: “The resolutions announced today demonstrate once again the department’s commitment to aggressively investigate and prosecute international bribery by U.S. and foreign corporations alike.”
SEC
In a settled civil complaint (see here) charging FCPA anti-bribery violations and FCPA books and records and internal violations, the SEC alleged that “between at least 1995 and 2004, senior executives at Technip, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas (“LNG”) production facilities on Bonny Island, Nigeria.” According to the SEC, “to conceal the illicit payments, Technip and others, through the joint venture, entered into sham ‘consulting’ or ‘services’ agreements with intermediaries who would then funnel their purportedly legitimate fees to Nigerian officials.” Specifically, the SEC alleged that “Technip, through the joint venture, implemented this scheme by using a Gibraltar shell company controlled by a solicitor based in the United Kingdom (“the UK Agent” [Tesler]) and a Japanese trading company (“the Japanese Agent”) as conduits for the bribes” and that “as a result of the scheme, numerous books and records of Technip contained false information relating to, among other things, the UK Agent and the Japanese Agent, and the payments made to them.”
As to Technip’s internal controls violations, the SEC alleges as follows:
“Technip conducted due diligence on the UK Agent that was not adequate to detect, deter or prevent the UK Agent from paying bribes, and Technip conducted no due diligence on the Japanese Agent.”
“Although the executives of Technip who participated in the joint venture were aware of [the FCPA’s] prohibitions, Technip did not implement adequate controls to ensure compliance with the Act. For example, Technip did not adopt due diligence procedures as to agents that were adequate to detect, deter or prevent the payment of bribes by agents. The due diligence procedures adopted by Technip only required that potential agents respond to a written questionnaire, seeking minimal background information about the agent. No additional due diligence was required, such as an interview of the agent, or a background check, or obtaining information beyond that provided by the answers to the questionnaire. A senior executive of Technip admitted that the due diligence procedures adopted by Technip were a perfunctory exercise, conducted so that Technip would have some documentation in its files of purported due diligence. In fact, Technip executives knew that the purpose of the agreements with the UK Agent was to funnel bribes to Nigerian officials, and therefore certain answers by the UK Agent to the questionnaire were false.”
According to the SEC release (see here) “without admitting or denying the SEC’s allegations, Technip has consented to the entry of a court order permanently enjoining it from” future FCPA violations “and ordering Technip to disgorge $98 million in ill-gotten profits derived from the scheme and prejudgment interest.”
Other members of the TSKJ joint venture that also potentially face FCPA exposure include Snamprogetti Netherlands B.V. (see below information regarding Eni SpA), and JGC of Japan (see here).
In March 2010, Eni SpA of Italy disclosed (here) as follows:
“Snamprogetti SpA, the holding company of Snamprogetti Netherlands BV, was a wholly owned subsidiary of Eni until February 2006, when an agreement was entered into for the sale of Snamprogetti to Saipem SpA and Snamprogetti was merged into Saipem as of October 1, 2008. Eni holds a 43% participation in Saipem. In connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for a variety of matters, including potential losses and charges resulting from the investigations into the TSKJ matter referred […}, even in relation to Snamprogetti subsidiaries.”
The disclosure further stated:
“As to Eni, the contacts with the US authorities have been intensified recently. Based on the ongoing status of the discussions, the Company has been able to estimate the cost of a global resolution of all potential claims arising from the investigation with the US authorities, similarly to Technip. As a result of this, a provision in the amount of €250 million has been accrued, also considering the contractual obligations assumed by Eni to indemnify Saipem as part of the divestment of Snamprogetti. Discussions with the US authorities are underway.”
Stay tuned for additional analysis of the Technip DPA, criminal information, and other issues raised by the Technip enforcement action.
Bourke’s Appeal
As previously noted (here), the Frederic Bourke case is arguably the most complex and convoluted case in the history of the FCPA.
The trial court portion of the case ended in November 2009 when Judge Scheindin sentenced Bourke to 366 days for, among other things, conspiracy to violate the FCPA. At sentencing Judge Scheindin stated – “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.”
Bourke has appealed his conviction to the Second Circuit.
An FCPA trial like Bourke’s is rare. An FCPA appeal is even more rare. An FCPA appeal to the influential Second Circuit is even more rare.
Thus, with good reason, this case is of great interest to those who follow the FCPA in that it is hoped to shed some light on the FCPA’s knowledge element, and perhaps other issues as well.
First step in the appeal is Bourke’s brief (see here) filed April 1st. The brief principally focuses on the FCPA’s knowledge element, including the trial court’s conscious avoidance jury instruction (a portion of the brief is redacted and a portion deals with Bourke’s false statement conviction).
This post summarizes the FCPA related issues in Bourke’s brief.
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According to the brief, the “trial focused on two related issues: whether Bourke knew that Kozeny was bribing the Azeris, and whether he willfully and corruptly joined the bribery conspiracy.”
The brief argues that the district court “committed a series of errors that crippled Bourke’s mens rea defense.”
The brief then discusses three such errors.
“First, the court instructed on conscious avoidance, despite the absence of evidence that Bourke deliberately avoided knowledge of Kozeny’s bribes.” According to the brief, this instruction was error “because there was no evidence that Bourke deliberately avoided learning about Kozeny’s bribery.” The brief states that the conscious avoidance instruction “was particularly damaging because the government presented evidence and argued that Bourke failed to exercise adequate due diligence, thus exacerbating the risk inherent in the conscious avoidance instruction that the jury would convict for negligence or recklessness.” The brief cites Second Circuit case law which emphasizes that “essential to the concept of conscious avoidance is the requirement that the defendant be shown to have decided not to learn the key fact, not merely to have failed to learn it through negligence” and argues that “the trial record contains no evidence that Bourke decided not to learn about Kozeny’s bribery.”
Bourke also argues that the court erred in admitting testimony about the due diligence performed by Texas Pacific Group (“TPG”), an investment fund that did not make the same investment as Bourke, because its lawyers advised of the FCPA risk. The brief states, “[b]ecause Bourke knew nothing about their work, their testimony was irrelevant to his state of mind” particularly since the results were never shared or communicated with Bourke. According to the brief, “the government offered the testimony […] solely as a contrast with the comparatively skimpy inquiry that Bourke and his lawyers performed.” “That testimony” according to the brief, “increased the risk, created by the conscious avoidance instruction and heightened by the government’s closing, that the jury would convict Bourke based on his negligence or recklessness — what he should have known, rather than what he actually knew.” The brief argues that the “government’s tactic had its intended effect on the jury” and it cites the foreman of the of jury telling the press, “It was Kozeny, it was Azerbaijan, it was a foreign country …. We thought he knew and definitely could have known. He’s an investor. It’s his job to know.”
The brief further argues that, having admitted the above testimony relating to TPG, “the district court should at least have permitted Bourke to present the contrasting testimony” of the head of investments for Columbia University that would have established that “Columbia invested $15 million with Kozeny in Azeri privatization after due diligence comparable to Bourke’s.” According to the brief, this excluded testimony “would have rebutted the government’s claim that Bourke’s lack of due diligence compared to TPG established his culpability.” The brief argues that “once the district court permitted the government to present TPG’s due diligence as a benchmark for measuring Bourke’s inquiry, fairness demanded that Bourke be allowed to present the contrasting picture of Columbia’s due diligence, which resembled his own.”
Second, the brief states – “the court refused to instruct that conviction for conspiracy requires the same mens rea as the underlying FCPA offense — meaning (among other things) a bad purpose to disobey or disregard the law.” According to the brief, “the district court compounded its error in giving the conscious avoidance instruction by rejecting Bourke’s requested instruction [as to the conspiracy charge] that the government had to prove that he acted corruptly and willfully.” The brief argues that “when the district court turned to the mens rea required for the conspiracy offense, rather than for a substantive FCPA offense, it omitted the requirement that the defendant act corruptly” and that this “watering-down of the mens rea requirement for the conspiracy charged […] undermined Bourke’s defense, which rested on his state of mind.”
“Third, the court rejected Bourke’s proposed good faith instructions, even though Bourke produced ample evidence to warrant the instructions and no other instruction covered the point.” The brief argues that Bourke’s proposed instruction “accurately reflected the principle that a defendant’s good faith belief that he acted lawfully negates the mens rea for specific intent offenses.” While the brief concedes that Bourke’s efforts to investigate the investment “were not as extensive” as others, his efforts “suffice for a good faith instruction.” Because the case turned on Bourke’s state of mind, the brief states “there is no doubt that the good faith defense, if accepted by the jury, would have produced an acquittal.”
The brief argues that “any one of the errors concerning Bourke’s knowledge of Kozeny’s bribes and his specific criminal intent, standing alone, warrants reversal” and if any one error is harmless in isolation, then their “cumulative effect profoundly damaged Bourke’s defense.”
Next up … the DOJ which has until July 29th to file its response brief.