Government passes tough test getting FCPA conviction against Bourke

There are few areas of litigation hotter than Foreign Corrupt Practices Act cases. So, the conviction of Connecticut entrepreneur Frederic Bourke will be picked over for quite some time.

For those of you who didn’t catch the news, a federal jury in New York found Bourke guilty of violating the FCPA and the Travel Act and making false statements to the FBI. He was acquitted of money laundering charges, according to the New York Law Journal. During the six-week trial before New York federal district court judge Shira Scheindlin, prosecutors presented evidence that Bourke knew about a scheme hatched by Czech expatriate Viktor Kozeny in the late 1990s to bribe Azerbaijan government officials to sell off the country’s state-owned oil company.

The government’s case was based largely on the testimony of two witnesses who said they told Bourke about the bribes. Those two witnesses,Thomas Farrell and Hans Bodmer, have pled guilty to charges related to the case and have been cooperating with the government in hopes of getting lighter sentences. The defense tried to poke holes in their testimony by showing inconsistent dates they offered for the alleged incriminating conversations with Bourke.

But one juror told the New York Law Journal that the substance of the conversations were more important. “”She said on the timing ‘If you think the substance is right and the timing is wrong, remember that it was 12 years ago,’ the juror said.

In addition to arguing that Bourke knew of the bribes, prosecutors also said he consciously avoided knowing about them. During her summation, assistant U.S. attorney Iris Lan said that Bourke had stuck his “head in the sand,” a phrase we’re told actually appears in the legislative history of the FCPA.

James Tillen, Miller & Chevalier’s FCPA practice head, said the case is an example of DOJ’s aggressive interpretation of the FCPA’s knowledge standard. Where that standard was a bit vague before, it’s now more clear, he said. And it’s not especially reassuring. ” struck fear in boards of companies across the country,” he told us.

The AmLaw Litigation Daily, July 10, 2009

U.S. Department of Justice Press Release, July 10, 2009

Frederic A. Bourke Jr., 63, was found guilty today by a federal jury in Manhattan of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act, and making false statements to the FBI. Bourke, of Greenwich, Conn., was convicted following a six-week jury trial before U.S. District Judge Shira A. Scheindlin.

Evidence presented at trial established that Bourke was a knowing participant in a scheme to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash, and other gifts. According to evidence presented at court, the bribes were meant to ensure that those officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that only Bourke, fugitive Czech investor Viktor Kozeny and members of their investment consortium could win, to their massive profit. According to evidence presented at trial, the scheme involved the purchase of vouchers and options that could be used to bid for shares in SOCAR. The vouchers and options were largely purchased with millions of dollars of cash flown into Azerbaijan on private planes. The vouchers and options were intended to be exercised by Oily Rock Ltd., a company Kozeny allegedly controlled, according to evidence presented at trial. Bourke, a friend and neighbor of Kozeny’s in Aspen, Colo., invested approximately $8 million in Oily Rock, on behalf of himself and family members and friends. Evidence also showed that Bourke obtained directorships, salary and stock options with related companies that Kozeny allegedly set up and funded.

Beginning in August 1997 through fall 1998, evidence presented at trial showed that Bourke and others conspired to pay or cause to be paid millions of dollars worth of bribes to Azeri government officials to ensure that their investment consortium would gain, in secret partnership with the Azeri officials, a controlling interest in SOCAR and its substantial oil reserves. For example, evidence presented at trial showed that in August 1997, Kozeny allegedly agreed to transfer to corrupt Azeri officials two-thirds of the vouchers and options Oily Rock purchased, and to give them two-thirds of all of the profits arising from his investment consortium’s participation in SOCAR’s privatization. In addition, evidence presented at trial showed that in June 1998, Bourke knew that Kozeny arranged for Oily Rock to increase its authorized share capital from $150 million to $450 million so that the additional $300 million worth of Oily Rock shares could be transferred to one or more of the Azeri officials as a further bribe payment. Bourke also arranged for two of the corrupt officials to travel to New York City on different occasions in 1998 to receive medical treatment, for which Oily Rock paid. Thereafter, in interviews with the FBI in April and May of 2002, Bourke falsely stated that he was not aware that Kozeny had made the alleged payments to the Azeri Officials.

Bourke and Kozeny were indicted in October 2005. At sentencing, scheduled for Oct. 13, 2009, Bourke faces a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss resulting from the alleged violations on each of the two counts on which he was convicted. Bourke was acquitted of one count of money laundering.

The prosecution and the related case against Kozeny are being handled jointly by the U.S. Attorney’s Office for the Southern District of New York and the Criminal Division’s Fraud Section. Assistant U.S. Attorneys Harry A. Chernoff and Iris Lan, as well as Fraud Section Deputy Chief Mark F. Mendelsohn and Assistant Chief Robertson Park are prosecuting the case.

The charges contained in the indictment are merely accusations and defendants are presumed innocent unless and until proven guilty.

Source: Connecticut Investor Found Guilty in Massive Scheme to Bribe Senior Government Officials in the Republic of Azerbaijan, July 10, 2009

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