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Executive Convicted of Bribery Under FCPA Based Only on Circumstantial Evidence

02.26.12

Bryan B. Lavine

John S. West

Megan Conway Rahman

Based on a recent decision by the Second Circuit Court of Appeals involving the Foreign Corrupt Practices Act (FCPA), the U.S. Department of Justice may establish that a defendant participated in a bribery scheme without presenting any evidence that the defendant had actual knowledge of corruption or any evidence that the defendant paid any bribes to foreign officials.

Fredrick Bourke was convicted after five weeks of trial testimony describing his alleged participation in a scheme to bribe senior government officials in connection with 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.

Prosecutors asserted that Bourke invested almost $8 million in the attempted privatization of SOCAR with “knowledge” that his co-defendant had offered bribes to the senior government officials to secure the deal. Without evidence of Bourke’s actual knowledge or proof that he made any payments himself, the prosecutors presented circumstantial evidence suggesting that Bourke should have known of the bribery scheme based on the pervasive corruption in Azerbaijan generally, his co-defendant’s reputation as the “Pirate of Prague,” Bourke’s voicing of concerns about whether his co-defendant and company were, in fact, paying bribes, and Bourke’s creation of an American advisory company to shield himself from FCPA liability.

While Bourke appealed several issues, most significant was his challenge to the district court’s jury instruction on “conscious avoidance.” Bourke argued that the instruction was improper because it lacked any factual predicate. The Court disagreed, finding that from the evidence,“[t]aken together, a rational juror could conclude that Bourke deliberately avoided confirming his suspicions that Kozeny and his cohorts may be paying bribes,” and that “this same evidence may also be used to infer that Bourke actually knew about the crimes.”

Finally, the Court 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 also found no error in the district court allowing in evidence of the testimony of others with access to the same sources of information as Bourke who were able to discern the scheme and avoid participation in it. Such evidence, according to the Court, does not allow for a conviction based on negligence, but rather, supports the government’s argument “that Bourke refrained from asking his attorneys to undertake the same due diligence done by [others] because Bourke was consciously avoiding learning about the bribes.”

This case serves to highlight the need for investors in foreign countries to be aware of the reputation of who they are doing business with and the landscape of the country where they are conducting their business. It is also equally important to know whether you will be doing business with any government officials or entities and what role third parties will play in your business dealings. Do not be afraid to ask questions, conduct due diligence and take the necessary steps to discover all of the details of your business dealings in foreign countries before the government does it for you.

© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.

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