Tag: Azerbaijan

FCPA Conviction Upheld

There are few court cases involving the Foreign Corrupt Practices Act. Most of those accused quickly settle and move on. With few court cases that means the appellate decisions helping to interpret the FCPA are rare. Yesterday we had one of those rare sightings.

Frederic Bourke was convicted of FCPA violations in 2009. Bourke co-founded the fashion accessory company Dooney & Bourke, but considers himself an inventor, investor and philanthropist. Unfortunately he fell into business with Viktor Kozeny, the Pirate of Prague. The government charged Kozeny and Bourke with conspiring in a scheme to illegally purchase the state-owned oil company of Azerbaijan, SOCAR, by bribing the Azerbaijani president and other government officials.

Bourke’s main defense to the charges was that he did not have explicit knowledge of the bribery.  The government took the position that Bourke had “conscious avoidance”.

Under those circumstances, a jury might conclude that no actual knowledge existed but might nonetheless convict, if it believed that the defendant had not tried hard enough to learn the truth.

However, the government had some statements from Bourke stepping around the bribery issue. Unfortunately, Bourke also got some advice from his attorney “that if Bourke thought there might be bribes paid, Bourke could not just look the other way.” That was in 1999 and before the current era of FCPA enforcement. I think you would be hard-pressed to find an attorney who make that statement today. The Sergeant Schultz defense does not work any more when it comes to bribery.

Sources:

Sticking Your Head in the Sand and the FCPA

dooney and Bourke

Prosecutors told the jury during Frederic Bourke’s trial that instead of doing adequate due diligence for his investment, he’d “stuck his head in the sand.” A jury convicted him conspiring to violate the Foreign Corrupt Practices Act and making false statements to federal investigators.

How did the head of a prominent handbag company end up in this position? What did Bourke do?

He invested in a deal in a country where he knew or should have known that bribes would be paid. He didn’t pay any bribes himself. He didn’t benefit from the bribes. He lost his money in the investment.

Bourke invested in Czech-born Viktor Kozeny’s unsuccessful attempt in 1998 to gain control of Azerbaijan’s state oil company.  Kozeny himself had a shady background and was known as the Prague Pirate. Kozeny’s plan was to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash, and other gifts to ensure that those officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that their investment consortium could win. Prosecutors offered evidence that Bourke “consciously avoided” learning about the bribes by not asking questions about them. Jurors were allowed to convict if they found Bourke knew or took steps to avoid learning of the payments.

The jury looked at the shady deal, the shady partner and in a shady country and must have thought that bribery was obvious. Bourke just chose to ignore the warning signs.

The sentence for Bourke is up to five years in prison for the FCPA violation, and another five for lying to the FBI.

References:

Kozeny Decision Limits Defense to FCPA

Melissa Klein Aguilar wrote a peice on Compliance Week about the decision in U.S. v. Kozeny decision that limits the local law defense under the Foreign Corrupt Practices Act: FCPA Decision Narrows Local-Law Defense.

The Kozeny decision makes clear that if the payment itself is illegal, the local-law defense can’t be used even if the common practice in that country is to forgive the offense; the transaction must be permitted under local law.

In the facts of the Kozeny case were unusual. Local Azerbaijani law the voluntary declaration of having committed bribery absolves the bribe-giver and his accomplices from criminal responsibility. The Kozeny court did not seem to think this was the same as the bribe being legal.

The judge also finds that mere economic coercion is not a defense. The Kozeny judge equates true extortion with a “payment made to an official to keep an oil rig from being dynamited.”

The article also points us to two law firm legal alerts: