Lindsey Counsel Reacts To O'Shea Acquittal

What does Jan Handzlik, left, think of yesterday's stunning end to John O'Shea's FCPA trial in Houston?

“It may seem old fashioned," said Handzlik, a partner in Venable LLP, "but liability under the FCPA still requires that the acts charged be accompanied by a specific, corrupt intent. Judge Hughes’ ruling reaffirms this basic tenant of criminal law, which applies in FCPA cases just as it does in bank robberies, mail thefts and other federal offenses."

Handzlik represented Keith Lindsey and Lindsey Manufacturing in their FCPA trial last year. The judge dismissed their indictments in December after a jury trial because of misconduct by prosecutors. The case against co-defendant Steve K. Lee was also dismissed, and the guilty plea by Angela Aguilar to money laundering was vacated. The DOJ is appealing the dismissals. 

"It’s much more challenging for the government when defendants persist in asserting their innocence," Handzlik said.

Bourke Free For Appeals, Previews SCOTUS Pitch

Frederic Bourke can remain free during his appeals, even while he asks the United States Supreme Court to review his case.

That means he won't go to prison anytime soon and may never spend time behind bars.

Judge Shira Scheindlin released Bourke on bail until all his new appeals are finished. She issued her ruling on December 28. Bourke had been scheduled to start serving his jail time on January 3.

He was given a year and a day in prison after a jury convicted him in 2009 of conspiracy to violate the FCPA. Judge Scheindlin presided at the trial and decided on his sentence.

In mid December last year, Bourke lost his appeal to the U.S. Court of Appeals for the Second Circuit. The next day, Judge Scheindlin denied his motion for a new trial. A few days later she set the date for him to report to prison.

But Bourke's release during any new appeals came after his lawyer, Michael Tigar, wrote a letter to Judge Scheindlin. Tigar said an issue for further appeals is 'conscious avoidance' and Judge Scheindlin's instruction to the jury about it. Tigar called it the 'ostrich instruction.'

Bourke's case, Tigar wrote, presents the conscious avoidance issue in a way 'that merits consideration on rehearing, rehearing en banc and certiorari.'

En banc refers to a fresh review by a larger panel of judges from the federal appeals court. Certiorari means a request to the U.S. Supreme Court for review. Exhausting the entire appeal process can take years.

Tigar's letter said:

Ever since Judge, later Justice, Kennedy's opinion in United States v. Jewell, 532 F.2d 697 (9th Cir. 1976), judges, lawyers and academic commentators have been awaiting a Supreme Court decision on the ostrich instruction. . . . For decades, the Supreme Court has been strengthening the law of mens rea, particularly for statutory crimes. See, e.g., Cheek v. United States, 498 US. 192 (1991); Ratzlaffv. United States, 510 US. 135 (1994); Staples v. United States, 511 US. 600 (1994). See also Liparota v. United States, 471 U.S. 419 (1985). At the same time, prosecutors have been working to relax the proof required to sustain the burden that the Court has carefully erected.

Bourke has been free on $20 million bond since his conviction in 2009. He's not allowed to travel overseas.

Tigar said the conscious avoidance standard Judge Scheindlin used at Bourke's trial 'allows juries to convict upon a finding of negligence for crimes that require intent.' He was quoting Judge Posner in U.S. v. Giovanetti, 919 F.2d 1223 (7th Cir. 1990).

After his sentencing, Bourke was assigned to the Federal Correctional Institution of Englewood. It's a low security prison in Littleton, Colorado (15 miles southwest of Denver). There's also a minimum security camp next door. Records at the Federal Bureau of Prisons show Bourke, 65, as prisoner number 58333-054. His status was marked as 'in transit.' But the recent ruling meant he never reported to the prison.

Judge Scheindlin's December 28 order was hand written in the margins of Tigar's letter. The judge said: 'For the reasons previously explained by this Court, bail is continued for the remainder of the appellate process -- including disposition of rehearing and rehearing en banc and disposition of any petition for certiorari to the U.S. Supreme Court.'

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Download a copy of Michael Tigar's December 22, 2011 letter to Judge Judge Shira A. Scheindlin endorsed and ordered on December 28, 2011 in U.S. v. Kozeny et al, U.S. District Court, Southern District of New York (Foley Square), Case #: 1:05-cr-00518-SAS-2 here. 

Frederic Bourke And The Four Bad Facts

By Matthew T. Reinhard

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.

Updated: Bourke Conviction Upheld On Appeal

Frederic Bourke's conviction on an FCPA conspiracy was upheld by the Second Circuit Court of Appeals.

Bourke was found guilty by a federal jury in Manhattan in July 2009 of investing in an oil privatization scheme in Azerbaijan despite knowing officials there would be bribed.

He was sentenced to a year and a day in prison and fined $1 million.

In his appeal, Bourke argued that the trial court judge gave a wrong jury instruction on the issue of 'conscious disregard,' part of the knowledge element under the FCPA.

An excellent account of Bourke's case and the appeal was reported by Bloomberg's David Glovin and Patricia Hurtado.

“A rational juror could conclude that Bourke deliberately avoided confirming his suspicions” about bribes, two judges wrote in a 27-page ruling. “This same evidence may also be used to infer that Bourke actually knew about the crimes.”

Bourke's lawyers are also asking the trial court to grant a new trial. They have argued that the DOJ knowingly allowed a key witness, Hans Bodmer, to testify falsely about when he and Bourke allegedly discussed bribes to officials in Azerbaijan. The appellate court didn't mention that issue.

Bourke has been free on bail of $10 million pending the outcome of his appeal.

Solving The Problem of Gifts, Meals, and Entertainment Expenses

By Michael Volkov

Last week on Corruption, Crime & Compllance, I wrote that the increase in FCPA enforcement has led to 'mass hysteria,' whipped up by lawyers and others.

But there's a shortage of practical solutions, especially when it comes to gifts, meals and entertainment expenses.

In my post, I suggested an approach that is less technical and more common-sense based. 'Negligent conduct,' I said, 'does not mean criminal conduct. Mistakes are not criminal.'

I hope readers of the FCPA Blog will find the post useful.

It can be found here.

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Michael Volkov is the primary contributor to Corruption, Crime & Compliance. He's a former federal prosecutor and now a partner at Mayer Brown LLP in Washington, D.C. He regularly counsels and represents clients on FCPA and UK Anti-Bribery Act issues. He can be contacted here.