In July 2009, following a six-week jury trial, Connecticut businessman Frederic Bourke was convicted of violating the FCPA related to his investment in a privatization program in the Republic of Azerbaijan. At trial, prosecutors from DOJ and the United States Attorney’s Office for the Southern District of New York argued that Bourke and his business partners, particularly Viktor Kozeny, arranged to receive a controlling interest in the State Oil Company of the Azerbaijan Republic (SOCAR) through a secret partnership with government officials. Following the verdict, Bourke was sentenced to one year and one day in prison and ordered to pay a $1 million fine.
The prosecutors in Bourke’scase alleged that Kozeny and members of his investment consortium bribed government officials to encourage them to privatize SOCAR and to ensure that the consortium would gain a controlling interest in it. The government presented evidence that, acting through Oily Rock Ltd., Kozeny and the others bribed government officials by making cash payments to them, by surreptitiously transferring a twothirds interest in Oily Rock’s stake in the privatization venture to them, and by helping them or their family members to obtain medical appointments, visas, and college admissions in the United States. Bourke was not alleged to have played a significant role in carrying out the bribes (although prosecutors presented evidence that he arranged for two officials to receive medical treatment funded by Oily Rock) but the DOJ proceeded against him because of his extensive involvement with Oily Rock (he had invested approximately $8 million in Oily Rock and accepted directorships, salary, and stock options with companies related to it) and his knowledge of rampant corruption in Azerbaijan.
Thus, at Bourke’s trial the government relied on the “conscious avoidance” theory in addition to a conspiracy theory. In regard to the former, the FCPA provides that “[w]hen 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.” Based on that provision, the government argued that Bourke was guilty of violating the FCPA because he purposely avoided knowledge of Kozeny’s bribery scheme. To show that Bourke was aware of the high probability that Azeri officials were being bribed as part of the investment effort, the prosecutors presented evidence of corruption in Azerbaijan generally, of Bourke’s personal knowledge of the corruption, and of knowledge by Bourke’s colleagues of the corruption.
In a post-trial motion for acquittal, Bourke argued that the government’s evidence of his alleged knowledge was so tenuous that the court’s conscious avoidance charge likely misled the jury into believing it could convict him on the basis that he had “not tried hard enough to learn the truth.” He also argued that the evidence showed mere negligence at most. The court rejected both contentions, pointing to the testimony of several witnesses that Bourke “knew that corruption was rampant in Azerbaijan” and knew about Kozeny’s “exploits and misdeeds” in Czechoslovakia during thatcountry’s earlier privatization period. In addition, the prosecutors had presented a taperecorded telephone conference among Bourke, a business partner, and their attorneys during which Bourke made statements evidencing a concern that Kozeny was paying bribes. The court also pointed out that, when asked to assume a position on Oily Rock’s board of directors, Bourke instead arranged to accept a position with a related entity, in an apparent attempt to distance himself from knowledge of Oily Rock’s activities. Finally, the court credited the government’s reliance on evidence comparing the scant due diligence work performed by Bourke and his attorneys with the due diligence efforts of others asked to join the consortium, noting that “[t]he Government was entitled to show that others – who were exposed to the same sources as Bourke – had high suspicions regarding the legitimacy of the venture which they were able to later confirm while Bourke willfully shielded himself from learning all the facts.” The court concluded that, even if Bourke did not actually know about the bribery scheme, the government had presented sufficient evidence to show that he “knew of the high probability that bribes were being paid” and “took steps to ensure that he did notacquire knowledge” ofbribery.
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