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Knowing What You Don’t Know

Prosecutors told the jury during Frederic Bourke’s trial that instead of doing adequate due diligence for his investment in Viktor Kozeny’s Azerbaijan privatization scheme, he’d “stuck his head in the sand.” It may not sound like legal jargon but the “head-in-the-sand” phrase pops up often in criminal law and appears prominently in the Foreign Corrupt Practices Act’s legislative history.

The Congressional Research Service said this in its report to Congress about enactment of the FCPA and its 1988 and 1998 amendments:

The “knowing” requirement . . . is intended to encompass the “conscious disregard” and “willful blindness” standards, including a conscious purpose to avoid learning the truth. The Conferees agreed that “simple negligence” or “mere foolishness” should not be the basis for liability.

However, the Conferees also agreed that the so-called “head-in-the-sand” problem– variously described in the pertinent authorities as “conscious disregard,” “willful blindness” or “deliberate ignorance”–should be covered so that management officials could not take refuge from the Act’s prohibitions by their unwarranted obliviousness to any action (or inaction), language or other “signaling device” that should reasonably alert them of the “high probability” of an FCPA violation. *

Bourke, let’s remember, was tried and convicted not under the FCPA itself but the general conspiracy statute (18 U.S.C. § 371—Conspiracy to Defraud the United States).** But he conspired to violate the FCPA’s antibribery provisions, where offenses have to be “knowing,” so any prosecution for an FCPA conspiracy would have to meet the same requirement.***

We haven’t seen the instructions the judge issued to the jury about the law in Bourke’s case. Most federal jury instructions, however, cover two kinds of “knowing:” what the defendant actually knows and what he or she should know under the circumstances. A typical jury instruction about the second kind of “knowing” would look like this:

In deciding whether [defendant] acted knowingly, you may infer that [defendant] had knowledge of a fact if you find that he/she deliberately closed his/her eyes to a fact that otherwise would have been obvious to him/her. In order to infer knowledge, you must find that two things have been established.

First, that [defendant] was aware of a high probability of [the fact in question].

Second, that [defendant] consciously and deliberately avoided learning of that fact. That is to say, [defendant] willfully made himself/herself blind to that fact.

It is entirely up to you to determine whether he/she deliberately closed his/her eyes to the fact and, if so, what inference, if any, should be drawn. However, it is important to bear in mind that mere negligence or mistake in failing to learn the fact is not sufficient. There must be a deliberate effort to remain ignorant of the fact.

From the Pattern Criminal Jury Instructions for the First Circuit at §2.14 (here). ****


Bourke didn’t testify at his trial but he had always said he didn’t know about Kozeny’s bribes. That might have been true. But it didn’t protect him because prosecutors could prove beyond a reasonable doubt that if he didn’t know, it was because he didn’t want to. So, legally speaking, he did know.
Head-in-the-sand accusations under the FCPA have long concerned managers, executives and board members. For them the verdict on Bourke brings a special warning. How much due diligence is enough? Relationships with overseas partners and agents are always troubling. Where’s the line between adequate inquiry and conscious disregard or willful blindness? There’s no easy answer. We say: More red flags, more due diligence. But how much more is always someone’s judgment call — and it had better be right.

Read all our posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.

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* The complete version of House Conference Report No. 100-576 for the 1988 Amendments included this unusually rich passage about “knowing:”

The “head-in-the-sand” problem is not unique to [the FCPA] and occurs in a variety of contexts, perhaps the most common being the situation where a person acquires property under “suspicious” circumstances and is charged with “knowledge” that it is stolen. Courts and commentators have considered such behavior to be “distinct from, but equally culpable as actual knowledge.” See G. Williams, Criminal Law: The General Part, sec. 57 at 157 (2d ed. 1961). (emphasis added) Federal case law has discussed the carefully-drawn elements that comprise the “head-in-the-sand” state of mind in other contexts.

The Conferees agree with the reasoning found in such decisions as United States v. Jewel, 532 F.2d 679 (9th Cir. 1976); United States v. Bright, 517 F.2d 584 (2d Cir. 1975); United States v. Jacobs, 470 F.2d 270, 287 n.37 (2d Cir.), cert. denied sub nom. Lavelle v. United States, 414 U.S. 821 (1973). See also H. Rept. No. 96-1396, 96th Cong., 1st Sess. 35 (1980). The knowledge requirement is not equivalent to “recklessness.” It requires an awareness of a high probability of the existence of the circumstance.

** 18 U.S.C. § 371. Conspiracy to commit offense or to defraud United States

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both. . .

*** The anti-bribery provisions contain the following definition of “knowing” at §78dd-2 and §78dd-3:

(A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if–

(i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or

(ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.

(B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.

**** The Seventh Circuit’s suggested instruction, as another example, similarly says:

4.06 “Knowingly” – Definition

When the word “knowingly” [the phrase “the defendant knew”] is used in these instructions, it means that the defendant realized what he was doing and was aware of the nature of his conduct, and did not act through ignorance, mistake or accident. [Knowledge may be proved by the defendant’s conduct, and by all the facts and circumstances surrounding the case.] [You may infer knowledge from a combination of suspicion and indifference to the truth. If you find that a person had a strong suspicion that things were not what they seemed or that someone had withheld some important facts, yet shut his eyes for fear of what he would learn, you may conclude that he acted knowingly, as I have used that word. {You may not conclude that the defendant had knowledge if he was merely negligent in not discovering the truth.}]
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