Frederic Bourke And The Four Bad Facts

The Second Circuit Court of Appeals recently released its long-awaited opinion in the appeal of hand-bag mogul turned FCPA defendant Frederic Bourke.

Bourke advanced a number of issues on appeal, but from an FCPA perspective none were as interesting as his contention that the trial court erred in giving a “conscious avoidance” instruction to the jury. A number of commentators, myself included, believed Bourke had potentially strong arguments in this regard and many were looking forward to some judicial guidance on the contours of the Government’s ability to sustain a conviction based on a defendant consciously avoiding learning bad facts.

Defying the punditry, the Court of Appeals ultimately took a very workmanlike approach in rejecting this argument. The Court found a sufficient factual predicate to support the instruction based on what I’m calling the “Evidence of the Four Bads” — bad place, bad person, bad actions, and bad thoughts. Specifically, the Court found a sufficient factual predicate for the instruction in evidence:

i) That Bourke was aware Azerbaijan was a corrupt place generally (bad place);

ii) That Bourke knew Kozeny had a corrupt reputation (bad person);

iii) That Bourke took affirmative steps to attempt to shield himself from FCPA liability by creating US advisory companies to hold his place (and investment) on the Oily Rock board (bad actions); and

iv) Most damning, Bourke’s recorded phone conversations with another investor and their attorneys where he mused about whether Kozeny was paying bribes and the appropriate response if one became aware Kozeny and his crew were paying bribes (bad thoughts).

The Court acknowledged that this evidence could also be used to show actual knowledge of bribery, but decided that it was not error to give a conscious avoidance jury instruction, noting that the same evidence may often be used to support actual knowledge or conscious avoidance.

All in all, the opinion from the Second Circuit in Bourke’s case is slightly anti-climactic in that it failed to significantly change the landscape of FCPA-jurisprudence. In the wake of this opinion there is little to stop the DOJ from continuing to prosecute individuals for FCPA-violations based on accumulated circumstantial evidence. More importantly, it serves as judicial notice that companies and individuals must be on especially high alert for corrupt activity when operating in areas with reputations for corruption or dealing with parties with unsavory reputations, as such evidence could be used to later support a finding they consciously avoided gaining knowledge of corrupt activity.

Mr. Bourke did not fare any better in the trial court either. The day after the Court of Appeals issued its decision the District Court denied Bourke’s motion for a new trial based on his allegation that the Government knowingly presented perjured testimony during Bourke’s trial. The District Court ordered Bourke to surrender himself to U.S. Marshals on January 3, 2012 to begin his sentence.

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Matthew T. Reinhard, above, is a member of the law firm of Miller & Chevalier in Washington, D.C. He focuses his practice on white collar crime, internal investigations, and complex civil litigation, including the Foreign Corrupt Practices Act. He can be reached here.