United States: Is "Conscious Avoidance" Sufficient To Establish Knowledge Under The FCPA? Depends Which Court You Ask.

Last Updated: January 9 2012
Article by Paul T. Friedman and Ruti Smithline

In 2011, the Department of Justice and the Securities and Exchange Commission continued their aggressive enforcement strategy to hold individuals accountable for FCPA violations. Facing the real possibility of jail time, individuals started fighting back in the courts rather than accepting settlements. As a result, now more than any time since the FCPA was enacted in 1977, the contours of the government's expansive interpretation of the FCPA are being shaped by judicial decisions. That is not to say, however, that judicial analysis has been entirely consistent.


At the end of 2011, the U.S. Court of Appeals for the Second Circuit affirmed Frederic Bourke's conviction arising from a scheme to bribe government officials in Azerbaijan in connection with the planned privatization of the state-owned oil company.

Bourke—co-founder of the luxury handbags line Dooney & Bourke—was indicted in 2005 for participating in a consortium of investors organized by Viktor Kozeny, an international businessman whose questionable reputation had earned him the nickname the "Pirate of Prague." The government alleged that Kozeny arranged for payments of tens of millions of dollars to various Azerbaijani officials that were intended to secure the privatization of the state-owned oil company. Ultimately, the company was not privatized, and Kozeny—along with the other investors including Bourke—lost their entire investment in the venture.

In 2009, Bourke was convicted after a jury trial of conspiring to violate the FCPA. Throughout the trial, Bourke maintained that he had no knowledge of the bribery scheme. While the government's primary theory was that Bourke in fact did have actual knowledge of the bribery, the government asked the judge to instruct the jury that it could convict Bourke on a "conscious avoidance" theory. That is, the jury could find that Bourke had the requisite knowledge to be found guilty if he was aware of a "high probability" that bribes were being paid, but he "consciously and intentionally avoided confirming that fact." Finding that Bourke consciously avoided learning of the bribery scheme, the jury convicted Bourke, and he was sentenced to a year and a day in prison and fined $1 million.

Bourke appealed the conviction on several grounds including that the trial court judge improperly instructed the jury on the issue of conscious avoidance. Bourke contended that the government failed to present evidence sufficient to establish such a theory. The Court of Appeals disagreed and cited the evidence at trial that Bourke was aware of the corruption in Azerbaijan and knew of Kozeny's poor reputation.1 The court also pointed to the fact that Bourke had voiced concerns (in a taped conversation) to another investor and his attorney that Kozeny may have been bribing government officials. The court relied on the fact that another investor declined to participate in the venture after his diligence left him uncomfortable about FCPA compliance. The court held that it was "entirely proper for the government to argue that Bourke refrained from asking his attorney to undertake the same due diligence done by [another investor] because Bourke was consciously avoiding learning about the bribes."2

The Bourke decision reaffirms the government's longstanding position that an individual may be prosecuted for a bribery offence even when there is no evidence that the individual had actual knowledge of the bribery scheme. It also emphasizes the importance of conducting FCPA due diligence prior to entering business ventures and highlights that failure to conduct due diligence offers no refuge from what could have been learned.


In contrast, in December of last year, the government suffered a setback when a federal district court judge vacated the conviction against Lindsey Manufacturers Co. and two of its executives on the basis of prosecutorial misconduct.3

Declining to follow the jury instructions given in Bourke, the trial judge in Lindsey rejected the government's request to include either a "deliberate ignorance" or a "willful blindness" instruction.4 Instead, Judge Matz instructed that for a defendant to have the requisite knowledge for purposes of the FCPA, the government had to establish actual knowledge or a "high probability of the existence of [] circumstance" of bribery.

Despite the court's refusal to permit the conscious avoidance instruction, during closing argument, the prosecutor started to explain that the rationale for the "high probability" instruction was because the law "is saying you can't turn a blind eye to what is . . . ." But, before the prosecutor could finish the sentence, the defense objected. The prosecutor apologized but went on to cover his eyes and tell the jury: "Defendants . . . cannot see all of this smoke and all of these red flags and then close their eyes."5

In the order to vacate the conviction—which was entered days before the Second Circuit issued its ruling in Bourke—Judge Matz held the prosecution's implied equation of "knowledge" with "willful blindness" was a "misstatement" of the law.6 The court noted that whether defendants had the required culpable knowledge was one of the hardest-fought issues in the case. According to Judge Matz, permitting the jurors to find culpability based on willful blindness "undoubtedly resonated with at least some of the weary jurors," and warranted dismissal of the


In the limited but expanding world of FCPA jurisprudence there now appears to be contradictory authority on the level of culpable knowledge required. Just how this will continue to evolve, and eventually be resolved, remains to be seen. Further judicial challenges may help bring clarity to this issue in 2012 and beyond. In the meantime, Bourke was ordered to surrender on January 3, 2012 to begin his prison sentence.


1 United States v. Bourke, No. 09-4704-cr(L) (2d Cir. Dec. 14, 2011).

2 Id.

3 Please refer to our Client Alert: False Affidavits and Lies Doom First-Ever FCPA Jury Conviction of Corporation (December 2, 2011)

4 United States v. Noriega, et al., No. 10-01031(A)-AHM (Dec. 1, 2011) at 21.

5 Id. at 22.

6 Id. at 23.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions