In a rare criminal conviction under the Foreign Corrupt Practices Act, the Second Circuit Court of Appeals affirmed the conviction of Frederick Bourke, co-founder of the accessory company Dooney & Bourke, U.S. v. Viktor Kozeny, David Pinkerton, Frederic Bourke, Jr., Docket No. 09-4704-cr(L) (2d Cir. Dec. 2011). The case has important implications for international business transactions.
In the late 1990s, the country of Azerbaijan began to privatize the state-owned oil company. Victor Kozeny formed two companies in connection with potential acquisitions from the government. As the Second Circuit recounts, Kozeny was then known as the Pirate of Prague on the basis of his reputation gained as part of the privatization of state-owned industries in the Czech Republic.
It was proven that Mr. Bourke was aware of this reputation. Thereafter, Kozeny sought outside investors. Mr. Bourke and other potential investors attended a meeting, the “gist” of was that Kozeny “had a relationship with the government in some way.” Mr. Bourke then established an investment company called Blueport. He put in $7 million. The entity invested in a Kozeny company. From May to September 1998 nearly $7 million in intended bribe payments were wired to various non-U.S. accounts. Mr. Bourke and others also arranged and paid for medical care, travel and lodging in the U.S. for a foreign official and his family. The venture failed, and the oil company was not privatized.
Nonetheless, in 2005, Bourke, Kozeny, and others were indicted on FCPA charges. Kozeny fled to the Bahamas. Bourke stood trial in the Southern District of New York and was convicted following a jury trial.
On appeal, Bourke, as the Second Circuit stated, “vigorously attacks his conviction on several fronts, including (1) the correctness of the jury instructions given, (2) the sufficiency of the evidence, and (3) the propriety of certain evidentiary rulings made by the district court”. The Court analyzed the law and evidence on each issue and affirmed the rulings of the court below. The bulk of the decision recounts the facts and law on what is called the “conscious avoidance” element of an FCPA offense. This proof permits a jury to find culpable knowledge on the part of a defendant when the evidence demonstrates that he intentionally avoided confirming a fact. The proof serves as a surrogate for showing actual knowledge.
For purpose of international practice, the decision serves as a clear signal that taking steps to avoid knowing the obvious will not enable avoidance of being charge or of conviction. Mr. Bourke was sentenced to prison for a year and a day.