Page 31 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

Thus, a person has the requisite knowledge
when he is aware of a high probability of the United States v. Kozeny, et al.
existence of such circumstance, unless the person
In December 2011, the U.S. Court of Appeals for the
actually believes that such circumstance does not Second Circuit upheld a conscious avoidance instruction
exist. 141 As Congress made clear, it meant to impose given during the 2009 trial of a businessman who was

liability not only on those with actual knowledge of convicted of conspiring to violate the FCPA’s anti-
wrongdoing, but also on those who purposefully bribery provisions by agreeing to make payments to
Azeri officials in a scheme to encourage the privatization
avoid actual knowledge:
of the Republic of Azerbaijan’s state oil company. The
[T]he so-called “head-in-the-sand” court of appeals found that the instruction did not lack
problem—variously described in the a factual predicate, citing evidence and testimony at
pertinent authorities as “conscious
disregard,” “willful blindness” or “deliberate trial demonstrating that the defendant knew corruption
ignorance”—should be covered so that was pervasive in Azerbaijan; that he was aware of his
management officials could not take business partner’s reputation for misconduct; that
refuge from the Act’s prohibitions by their he had created two U.S. companies in order to shield
unwarranted obliviousness to any action
(or inaction), language or other “signaling himself and other investors from potential liability for
device” that should reasonably alert payments made in violation of the FCPA; and that the
them of the “high probability” of an FCPA defendant expressed concerns during a conference call
violation. 142 about whether his business partner and company were

Common red flags associated with third parties bribing officials.
include: The court of appeals also rejected the defendant’s
contention that the conscious avoidance charge had
• excessive commissions to third-party agents
or consultants; improperly permitted the jury to convict him based on
• unreasonably large discounts to third-party negligence, explaining that ample evidence in the record
distributors; showed that the defendant had “serious concerns”
• third-party “consulting agreements” that about the legality of his partner’s business practices
include only vaguely described services; “and worked to avoid learning exactly what [he] was
• the third-party consultant is in a different doing,” and noting that the district court had specifically
line of business than that for which it has instructed the jury not to convict based on negligence.
been engaged;
• the third party is related to or closely
associated with the foreign official;
• the third party became part of the What Affirmative Defenses
transaction at the express request or Are Available?
insistence of the foreign official; The FCPA’s anti-bribery provisions contain
• the third party is merely a shell company
incorporated in an offshore jurisdiction; and two affirmative defenses: (1) that the payment
• the third party requests payment to was lawful under the written laws of the foreign
offshore bank accounts. country (the “local law” defense), and (2) that the

Businesses may reduce the FCPA risks money was spent as part of demonstrating a
associated with third-party agents by implementing product or performing a contractual obligation (the
an effective compliance program, which includes “reasonable and bona fide business expenditure”
due diligence of any prospective agents. defense). Because these are affirmative defenses,

the defendant bears the burden of proving them.

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