In the Courts

Bourke argued that a “conscious avoidance” instruction was improper both because there was no evidence to support the theory, and because the government waived reliance on the theory by not arguing it during the trial. Id. at 130. Bourke also argued that the charge allowed him to be convicted based on negligence, citing the governments reliance on evidence that other parties with access to the same information as Bourke deduced Kozeny's scheme and decided not to participate. Id. at 134. The court rejected each of these arguments in turn.

First, the court found that there was “ample evidence to support conviction based on the alternate theory of conscious avoidance,” citing testimony that Bourke was aware of pervasive corruption in Azerbaijan as well as Kozeny's “Pirate of Prague” moniker, and that Bourke created subsidiary companies with the specific intent to shield himself from potential liability. Id. at 133-34. In particular, the court cited a tape-recorded telephone conference in which Bourke voiced concerns about whether Kozeny might be paying bribes, and requested advice from his attorney regarding his liability for any corrupt payments made by Kozeny. Id. The court noted that “the very nature of conscious avoidance makes it unlikely that the record will contain directly incriminating statements” and, thus, convictions under this theory will often be based on circumstantial evidence that may also support knowledge as a theory of mens rea. Id. at 134.

The court also found that the government's introduction of evidence related to the due diligence efforts and decisions of other parties was proper, holding that such evidence supported the government's arguments that Bourke consciously refrained from asking his attorneys to conduct appropriate due diligence in spite of the efforts of other, similarly situated parties. Id. at 134-25. In addition, the district ourt specifically charged the jury that it could not convict based on negligence, a charge that the court found there was no reason to suspect the jury had ignored. Id. at 135. The court found each of Bourke's other arguments to be without merit and affirmed his conviction.

The district court agreed to allow Bourke to remain free on bail until the conclusion of appellate proceedings, as Bourke's attorneys indicated that they intend to seek review of the appellate court's decision regarding the “conscious avoidance” jury instruction by petitioning both for an en banc rehearing in the Second Circuit as well as petitioning the Supreme Court for certiorari. True to those statements, Bourke filed a petition for re-hearing by the Second Circuit on Jan. 27, 2012, citing the Supreme Court's intervening decision in Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011). On March 1, 2012, the Second Circuit ordered the government to file a response to the petition.

In Global-Tech, the Supreme Court clarified that conviction under a “willful blindness” theory requires proof that the defendant “subjectively believe[s] that there is a high probability that a fact exists” and “t[ook] deliberate actions to avoid learning of that fact.” Id. at 2070. The Bourke petition offers an excellent opportunity for the Second Circuit to offer some much needed clarity as to how Global-Tech will be applied beyond of the rather limited factual analysis in that case, which involved a patent dispute. For instance, practitioners will be anxious for the court to offer guidance as to what conduct will suffice to meet the Supreme Court's requirement under Global-Tech for “deliberate action to avoided learning” the truth. While it remains unclear what “deliberate actions” will meet the Supreme Court's standards, it seems that mere failure to investigate in the face of “red flags” may be insufficient. Ultimately, if the Second Circuit declines to rehear the matter, the Supreme Court may well take up the issue, given the lack of clarity and prosecutors' increasing reliance on the conscious avoidance theory, particularly in the context of white-collar criminal prosecution.

Supreme Court Orders Re-argument on Alien Tort Statute

On March 5, 2012, the United States Supreme Court ordered re-argument in the appeal of Kiobel v. Royal Dutch Petroleum, et. al., 621 F.3d 111 (2d Cir.2010). Kiobel v. Royal Dutch Petroleum, et. al,, No. 10-1491, — S.Ct. — , 2012 WL 687061 (March 5, 2011). The case was first argued before the Court on Feb. 28, 2012, with the initial round of arguments focusing on whether the Alien Tort Statute (ATS), 18 U.S.C. ' 1350, authorized claims against corporations for human rights violations. In an
unusual turn of events, the Court issued an order for re-argument only days later, asking for argument focused on the broader question of “[w]hether and under what circumstances the Alien Tort Statute, 28 U.S.C. ' 1350, allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” Id.

Many multinational corporations have been sued based on allegations that they aided human rights violations or other violations of international law committed outside of U.S. territorial jurisdiction, typically by foreign governments against their own citizens and in their own countries. However, on Sept. 17, 2010, the United States Court of Appeals for the Second Circuit held that the ATS does not confer jurisdiction over corporations because corporate defendants are not subject to liability under customary international law. Kiobel v. Royal Dutch Petroleum, et. al., 621 F.3d 111 (2d Cir. 2010). According to the Second Circuit, corporate criminal liability is not a norm of customary international law, which is a requirement for liability under the ATS, as it has not been universally recognized by the states of the world, that instead “have determined that moral and legal responsibility for heinous crimes should rest on the individual whose conduct makes him or her 'hostis humani generis, an enemy of all mankind.'” Id. at 131, 149. The initial question presented in the petition for certiorari, filed on June 6, 2011, asked “[w]hether corporations are immune from tort liability for violations of the law of nations such as torture, extrajudicial executions or genocide, as the court of appeals decisions provides, or if corporations may be sued in the same manner as any other private party defendant under the ATS for such egregious violations, as the Eleventh Circuit has explicitly held.” Petition for Writ of Certioari, Kiobel v. Royal Dutch Petroleum, et. al,, — S.Ct. — (No. 10-1491) (June 6, 2011).

In the initial arguments before the Supreme Court, many of the Justices questioned the extraterritorial application of the law more generally, asking how U.S. courts could justify their jurisdictional reach under the ATS while no other nation would permit such suits. Transcript of Oral Argument, Kiobel v. Royal Dutch Petroleum, et. al., —S.Ct.— (No. 10-1491) (Feb. 28, 2012). Justice Roberts went so far as to suggest that allowing lawsuits under the ATS for human rights abuses taking place solely on foreign soil may itself contravene the law of nations. Id. at 8. Thus, while the Court's order for re-argument was somewhat surprising, the broader question presented in that order was not, as several of the Justices had already made known their concern regarding the extraordinary extraterritorial application of the ATS. Under the most recent order, briefing on the Court's broader inquiry should be completed by June 29, 2012. Order for Re-argument, Kiobel v. Royal Dutch Petroleum, et. al., — S.Ct. — (No. 10-1491) (March 5, 2011). Based on this briefing schedule, it seems that the Court may render a decision in this matter by year's end.

In the Courts and Business Crimes Hotline were written by Associate Editors Jamie Schafer and Matthew J. Alexander, respectively. Both are associates at Kirkland & Ellis LLP, Washington, DC.

Second Circuit Affirms FCPA Conviction of Frederic Bourke

On Dec. 14, 2011, the United States District Court for the Second Circuit affirmed the conviction of Frederic Bourke, Jr., co-founder of the well-known accessory company Dooney & Bourke, for conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and Travel Act under 18 U.S.C. ' 371, and making false statements in violation of ' 18 U.S.C. 1001. United States v. Kozeny, et. al., 667 F.3d 122 (2d Cir. 2011). The conviction was based on Bourke's role in a scheme during which transfers of stock, cash and gifts were made to senior government officials by Bourke's associate, Viktor Kozeny, a somewhat notorious international entrepreneur known as the “Pirate of Prague,” in an effort to gain control of a state-owned enterprise in Azerbaijan. Id. at 127-129.

In this appeal, Bourke challenged his conviction on numerous grounds, including challenges to particular evidentiary rulings and generally as to sufficiency of the evidence. Bourke also challenged jury instructions relating to mens rea and the “conscious avoidance” standard. Id. at 130-36. These arguments are particularly notable given that Bourke's conviction has become an important part of the FCPA canon as an example of application of the “conscious avoidance” standard.

Bourke argued that a “conscious avoidance” instruction was improper both because there was no evidence to support the theory, and because the government waived reliance on the theory by not arguing it during the trial. Id. at 130. Bourke also argued that the charge allowed him to be convicted based on negligence, citing the governments reliance on evidence that other parties with access to the same information as Bourke deduced Kozeny's scheme and decided not to participate. Id. at 134. The court rejected each of these arguments in turn.

First, the court found that there was “ample evidence to support conviction based on the alternate theory of conscious avoidance,” citing testimony that Bourke was aware of pervasive corruption in Azerbaijan as well as Kozeny's “Pirate of Prague” moniker, and that Bourke created subsidiary companies with the specific intent to shield himself from potential liability. Id. at 133-34. In particular, the court cited a tape-recorded telephone conference in which Bourke voiced concerns about whether Kozeny might be paying bribes, and requested advice from his attorney regarding his liability for any corrupt payments made by Kozeny. Id. The court noted that “the very nature of conscious avoidance makes it unlikely that the record will contain directly incriminating statements” and, thus, convictions under this theory will often be based on circumstantial evidence that may also support knowledge as a theory of mens rea. Id. at 134.

The court also found that the government's introduction of evidence related to the due diligence efforts and decisions of other parties was proper, holding that such evidence supported the government's arguments that Bourke consciously refrained from asking his attorneys to conduct appropriate due diligence in spite of the efforts of other, similarly situated parties. Id. at 134-25. In addition, the district ourt specifically charged the jury that it could not convict based on negligence, a charge that the court found there was no reason to suspect the jury had ignored. Id. at 135. The court found each of Bourke's other arguments to be without merit and affirmed his conviction.

The district court agreed to allow Bourke to remain free on bail until the conclusion of appellate proceedings, as Bourke's attorneys indicated that they intend to seek review of the appellate court's decision regarding the “conscious avoidance” jury instruction by petitioning both for an en banc rehearing in the Second Circuit as well as petitioning the Supreme Court for certiorari. True to those statements, Bourke filed a petition for re-hearing by the Second Circuit on Jan. 27, 2012, citing the Supreme Court's intervening decision in Global-Tech Appliances, Inc. v. SEB S.A. , 131 S. Ct. 2060 (2011). On March 1, 2012, the Second Circuit ordered the government to file a response to the petition.

In Global-Tech, the Supreme Court clarified that conviction under a “willful blindness” theory requires proof that the defendant “subjectively believe[s] that there is a high probability that a fact exists” and “t[ook] deliberate actions to avoid learning of that fact.” Id. at 2070. The Bourke petition offers an excellent opportunity for the Second Circuit to offer some much needed clarity as to how Global-Tech will be applied beyond of the rather limited factual analysis in that case, which involved a patent dispute. For instance, practitioners will be anxious for the court to offer guidance as to what conduct will suffice to meet the Supreme Court's requirement under Global-Tech for “deliberate action to avoided learning” the truth. While it remains unclear what “deliberate actions” will meet the Supreme Court's standards, it seems that mere failure to investigate in the face of “red flags” may be insufficient. Ultimately, if the Second Circuit declines to rehear the matter, the Supreme Court may well take up the issue, given the lack of clarity and prosecutors' increasing reliance on the conscious avoidance theory, particularly in the context of white-collar criminal prosecution.

Supreme Court Orders Re-argument on Alien Tort Statute

On March 5, 2012, the United States Supreme Court ordered re-argument in the appeal of Kiobel v. Royal Dutch Petroleum, et. al., 621 F.3d 111 (2d Cir.2010). Kiobel v. Royal Dutch Petroleum, et. al,, No. 10-1491, — S.Ct. — , 2012 WL 687061 (March 5, 2011). The case was first argued before the Court on Feb. 28, 2012, with the initial round of arguments focusing on whether the Alien Tort Statute (ATS), 18 U.S.C. ' 1350, authorized claims against corporations for human rights violations. In an
unusual turn of events, the Court issued an order for re-argument only days later, asking for argument focused on the broader question of “[w]hether and under what circumstances the Alien Tort Statute, 28 U.S.C. ' 1350, allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” Id.

Many multinational corporations have been sued based on allegations that they aided human rights violations or other violations of international law committed outside of U.S. territorial jurisdiction, typically by foreign governments against their own citizens and in their own countries. However, on Sept. 17, 2010, the United States Court of Appeals for the Second Circuit held that the ATS does not confer jurisdiction over corporations because corporate defendants are not subject to liability under customary international law. Kiobel v. Royal Dutch Petroleum, et. al., 621 F.3d 111 (2d Cir. 2010). According to the Second Circuit, corporate criminal liability is not a norm of customary international law, which is a requirement for liability under the ATS, as it has not been universally recognized by the states of the world, that instead “have determined that moral and legal responsibility for heinous crimes should rest on the individual whose conduct makes him or her 'hostis humani generis, an enemy of all mankind.'” Id. at 131, 149. The initial question presented in the petition for certiorari, filed on June 6, 2011, asked “[w]hether corporations are immune from tort liability for violations of the law of nations such as torture, extrajudicial executions or genocide, as the court of appeals decisions provides, or if corporations may be sued in the same manner as any other private party defendant under the ATS for such egregious violations, as the Eleventh Circuit has explicitly held.” Petition for Writ of Certioari, Kiobel v. Royal Dutch Petroleum, et. al,, — S.Ct. — (No. 10-1491) (June 6, 2011).

In the initial arguments before the Supreme Court, many of the Justices questioned the extraterritorial application of the law more generally, asking how U.S. courts could justify their jurisdictional reach under the ATS while no other nation would permit such suits. Transcript of Oral Argument, Kiobel v. Royal Dutch Petroleum, et. al., —S.Ct.— (No. 10-1491) (Feb. 28, 2012). Justice Roberts went so far as to suggest that allowing lawsuits under the ATS for human rights abuses taking place solely on foreign soil may itself contravene the law of nations. Id. at 8. Thus, while the Court's order for re-argument was somewhat surprising, the broader question presented in that order was not, as several of the Justices had already made known their concern regarding the extraordinary extraterritorial application of the ATS. Under the most recent order, briefing on the Court's broader inquiry should be completed by June 29, 2012. Order for Re-argument, Kiobel v. Royal Dutch Petroleum, et. al., — S.Ct. — (No. 10-1491) (March 5, 2011). Based on this briefing schedule, it seems that the Court may render a decision in this matter by year's end.

In the Courts and Business Crimes Hotline were written by Associate Editors Jamie Schafer and Matthew J. Alexander, respectively. Both are associates at Kirkland & Ellis LLP, Washington, DC.