On Friday July 10, a federal jury found Frederic A. Bourke Jr. guilty of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act, as well as of making false statements to the FBI. Bourke had been involved in a business venture with Viktor A. Kozeny, which was designed to induce the government of Azerbaijan to privatize its state-owned oil company, SOCAR, for their benefit. Kozeny, who is currently living as a fugitive in the Bahamas, allegedly paid several hundred million dollars in shares of stock, cash, and other gifts to various Azeri government officials including the president, Heydar Aliyev, and his son, who administered SOCAR.
This case is notable primarily because it gives a clear overview of the circumstances the government might deem sufficient to confer knowledge of improper payments, which is a requisite for FCPA liability. Specifically, the FCPA defines one to have “knowledge” of a particular circumstance if that person “is aware of a high probability of the existence” of such circumstance.  Willful blindness to a situation indicating a high probability of unlawful activity will thus satisfy the knowledge requirement. In Bourke’s case, although Viktor Kozeny allegedly paid the bribes, the government contended that Bourke, who directed funds to Kozeny for the investment, must have known about the bribes. The government alleged that Bourke was a knowing participant in the scheme despite the fact that he lost the $8 million that he invested with Kozeny, and even though Bourke convinced former U.S. Senator George Mitchell to invest money with Kozeny as well.
The “willful blindness” theory has played a role in DOJ settlements in the past. In one matter, the president and part-owner of a U.S. manufacturer of military airplane equipment authorized payments to a person he believed to be a relative of a foreign military official while aware that the relative provided no genuine services. The Department alleged that this gave rise to knowledge of a “high probability” that the payments were actually intended to benefit the foreign military official in return for securing contracts for sales and equipment; and that the defendant was aware of this fact but deliberately failed to investigate the true purpose of the payments. In another matter, the Department relied for the knowing element on allegations that the defendant entered into an agreement with a consultant who was recommended by a foreign official with the government agency that was the company’s customer; retained the consultant without conducting due diligence and without entering into a written agreement regarding the services to be provided; and paid the consultant a “commission” without any documentary evidence of services provided.
Both of the cases just described, however, involved negotiated resolutions — a guilty plea in one case, a non-prosecution agreement in the other. Bourke’s was the first in which the DOJ litigated to trial a willful blindness theory.
Certainly, the government had a number of things to which it could point. Evidence of Bourke’s willful blindness included a recorded phone conversation between Bourke, attorneys, and investors concerning how to shield oneself from liability for actions taken by Kozeny, and in which Bourke said, “They do a deal in Iran, I don’t know if they pay $10 million,” as well as “What happens if they bribe somebody in Kazakhstan? Let’s say they tell you that. What do you do with that?” and that Senator Mitchell “will do anything I suggest.” In addition, a memorandum describing a later teleconference quoted one participant as saying “this conversation never happened.” The government also pointed to the fact that Bourke knew Azeri officials were involved in the investment -- although Bourke argued that he thought the officials had paid suitable consideration for their stake. The government also alleged that Bourke had read but ignored a Fortune magazine article that called Kozeny the “Pirate of Prague” in relation to an almost identical bribery scheme in Czechoslovakia. Allegedly, Bourke also dismissed his lawyer’s description of Azerbaijan as a lawless “wild, wild, West” and acknowledged that business in Azerbaijan was not done “at arm’s length” while nevertheless undertaking no due diligence to avoid corruption. Finally, the government asserted that Bourke had estimated there was a “90 to 95 percent chance” that SOCAR would be privatized, which the government contended was an overly optimistic figure precisely because Bourke knew that Kozeny had bribed Azeri officials.
The government also offered something more than indirect evidence of Bourke’s knowledge, as two co-conspirators who had pleaded guilty and then offered their testimony alleged that Bourke had asked them whether Kozeny was bribing the government officials enough. That said, the jury did not have to credit these cooperators in order to convict. The prosecution went out of its way to argue that the circumstantial evidence of willful blindness was sufficient to convict; that Bourke had “buried his head in the sand” and instructed his lawyers to “build a wall” between himself and Kozeny; and that this course of action rendered him liable. The court in turn gave the jury a willful blindness instruction.
Given the nature of the government’s theory, the largely circumstantial evidence, defendant’s monetary losses to Kozeny as a result of the scheme, and the involvement of a prominent former politician like Senator Mitchell, it is notable that the jury agreed with the government. The case provides a stark reminder that a lack of actual knowledge of improper payments will not shield individuals from FCPA liability if the government can make the case that the defendant’s ignorance is deliberate.