Sometimes we are right. Sometimes lawyers give the right advice. Sometimes we are not hyper-ventilating about risks.
Many of my colleagues lost credibility with corporations when they equated the Bribery Act and the Sword of Damocles. Everyone knew deep in their hearts that the UK Bribery Act was a risk but was not the end of the world. It stands that way today and will probably look the same at the end of 2012.
FCPA practitioners, however, were right when it comes to criminal intent. We can read and advise on the FCPA statute. The Bourke decision underscores how right we were and are for the future.
Everyone may try to minimize the impact of the Bourke decision but it stands as precedent and it is a significant case.
First, an appeal based on sufficiency of the evidence is not a very difficult appeal for the government to win. The standard, as applied by the courts, is that the verdict will be upheld so long as a reasonable juror could construe the facts to find the defendant guilty. Not a very hard standard indeed.
In the FCPA world, however, the Bourke case joined the issue of just how much evidence must the government produce at trial for a reasonable juror to find that a person “knew” that the payment of a money to another person was going to end up as a bribe in the hands of a foreign government official. Why is this important?
This principle overarches every aspect of the FCPA. How much evidence does the government have to offer to support the inference that a third-party agent or any other person acting on behalf of a company was going to bribe a government official?
The answer from Bourke is the FCPA statute means what it says. The Second Circuit affirmed the jury’s verdict and the trial court’s jury instruction on the issue of “knowledge,” and ultimately affirmed Bourke’s criminal conviction for FCPA conspiracy, Travel Act and false statement convictions.
At the core of its decision, the Court affirmed what the FCPA statute says –
Knowledge may be established when a person is aware of a high probability of its existence, and consciously and intentionally avoided confirming that fact.
The factual basis in the Bourke case is extremely important and has direct application to third party due diligence judgments made every day by companies when hiring and retaining third party consultants and agents.
– Bourke “knew” that his business partner had a history of corrupt dealings.
– Bourke was told by a co-conspirator that foreign government officials would receive an ownership interest in the privatized venture by which they would acquire the state-owned enterprise.
– Bourke sought advice from his attorney on the limits, if any, of investor liability under FCPA if he learned that his partner paid bribes to foreign government officials.
– Bourke set up a separate company to funnel investments and shield himself from liability.
For compliance officers, all they need to do is substitute their company for the term “Bourke” in the list of facts above and see what happens for liability purposes. These are all red flags under due diligence analysis. The Bourke case underscores the need for every compliance officer to resolve red flags before proceeding with a business relationship. It takes not take much to apply these same factors to every day review and approval of third party agents.
The Justice Department does not have enough resources to prosecute each and every instance where due diligence of a third party agents was deficient. However, if a situation results in bribery, and the Justice Department learns of such bribery, the prosecutors will focus like a laser beam on the approval process and whether approval reflected the “ostrich in the sand” deliberate indifference to red flags.