The Accidental Felon?

Frederick Bourke, the government says, didn’t stumble into Viktor Kozeny’s conspiracy to violate the FCPA by accident, as Bourke contends. He either knew the deal was tainted by bribery and ignored the facts, or deliberately avoided learning the truth.

Either way, the government says, Bourke had “knowledge” under the FCPA to support his July 2009 conspiracy conviction.

While Bourke, 63, appeals his conviction to the United States Court of Appeals for the Second Circuit, he’s free on bail.

During his trial, prosecutors said if Bourke didn’t know Kozeny’s deal depended on bribing Azeri officials, it was because he’d stuck his head in sand. But that’s no defense, they said, because the FCPA expressly includes the concept of “conscious avoidance” (see 15 U.S.C. § 78dd-2(h)(3)(B)).

Evidence from the trial, the government argues, demonstrates that:

• Bourke was aware of the high level of corruption in Azerbaijan generally. Bourke’s attorney Arnold Levine warned him that Azerbaijan was like the “wild west.”

• 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 Czech 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. “I mean, they’re talking about doing a deal in Iran . . . Maybe they . . . bribed them, . . . with ten million bucks. . . . I’m not saying that’s what they’re going to do, but suppose they do that. What happens if . . . they bribe somebody in Kazakhstan and we’re at dinner and . . . one of the guys [says] ‘Well, you know, we paid some guy ten million bucks to get this now.’ . . . I’m just saying to you in general . . . do you think business is done at arm’s length in this part of the world?”

• Bourke proposed the formation of separate companies to shield himself and other American investors from liability for any corrupt payments.

• Bourke played a role in coordinating United States medical treatments, combined with tourism and shopping excursions, for Azerbaijani officials.

After the trial ended, the jury foreman was quoted as saying about Bourke: “We thought he knew and he definitely should have known.”

In its appellate argument, the government puts it more formally: From these facts, it says, “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.”

The jury found Bourke guilty of conspiring to violate the FCPA and the Travel Act and making false statements to the FBI. In November 2009, Judge Shira Scheindlin sentenced him to a year and a day in prison and a $1 million fine. She recommended to the Bureau of Prisons that he serve his time at the minimum security camp adjacent to FCI Englewood in Colorado, 15 miles southwest of Denver.

Bourke, though, says there couldn’t have been conscious avoidance because there was no evidence that he decided not to learn any specific fact about bribes Kozeny paid or planned to pay. And without that evidence, the jury shouldn’t have been instructed on conscious avoidance at all, because the instruction improperly lowered the government’s burden of proof. Instead, Bourke argues, the trial should only have been about what he actually knew.

Because Bourke didn’t pay any bribes himself, whether he consciously avoided the truth behind Kozeny’s deal was at the center of the trial and the jury’s deliberations. Judge Scheindlin had instructed them:

When knowledge of existence of a particular fact is an element of the offense, such knowledge may be established when a person is aware of a high probability of its existence, and consciously and intentionally avoided confirming that fact. Knowledge may be proven in this manner if, but only if, the person suspects the fact, realized its high probability, but refrained from obtaining the final confirmation because he wanted to be able to deny knowledge.

On the other hand, knowledge is not established in this manner if the person merely failed to learn the fact through negligence or if the person actually believed that the transaction was legal.

Was the government’s evidence specific enough to show Bourke’s “conscious avoidance” under the FCPA?

The Second Circuit will soon have a chance to answer the question.

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Download a copy of Bourke’s appellate brief here and the government’s brief here.

The jury charge in U.S. v. Frederic Bourke (United States District Court for the Southern District of New York, Case #: 1:05-cr-00518-SAS-2) can be downloaded here.