Sticking Your Head in the Sand and the FCPA

dooney and Bourke

Prosecutors told the jury during Frederic Bourke’s trial that instead of doing adequate due diligence for his investment, he’d “stuck his head in the sand.” A jury convicted him conspiring to violate the Foreign Corrupt Practices Act and making false statements to federal investigators.

How did the head of a prominent handbag company end up in this position? What did Bourke do?

He invested in a deal in a country where he knew or should have known that bribes would be paid. He didn’t pay any bribes himself. He didn’t benefit from the bribes. He lost his money in the investment.

Bourke invested in Czech-born Viktor Kozeny’s unsuccessful attempt in 1998 to gain control of Azerbaijan’s state oil company.  Kozeny himself had a shady background and was known as the Prague Pirate. Kozeny’s plan was to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash, and other gifts to ensure that those officials would privatize the State Oil Company of the Azerbaijan Republic (SOCAR) in a rigged auction that their investment consortium could win. Prosecutors offered evidence that Bourke “consciously avoided” learning about the bribes by not asking questions about them. Jurors were allowed to convict if they found Bourke knew or took steps to avoid learning of the payments.

The jury looked at the shady deal, the shady partner and in a shady country and must have thought that bribery was obvious. Bourke just chose to ignore the warning signs.

The sentence for Bourke is up to five years in prison for the FCPA violation, and another five for lying to the FBI.

References:

, , ,

3 Responses to Sticking Your Head in the Sand and the FCPA

  1. Lewis Kinard July 27, 2009 at 8:09 am #

    Well written and relevant. I have a blog post on the elements of an FCPA violation (http://is.gd/1OMzd). Your post puts it all into perspective with a true news story.

Trackbacks/Pingbacks

  1. Hollywood and the FCPA | Compliance Building - August 4, 2009

    […] the guilty verdict in the case of handbag magnate Frederic Bourke and while waiting for the verdict in the Jefferson corruption case, we can turn to Hollywood for […]

  2. FCPA Conviction Upheld | Compliance Building - December 15, 2011

    […] Frederic Bourke was convicted of FCPA violations in 2009. Bourke co-founded the fashion accessory company Dooney & Bourke, but considers himself an inventor, investor and philanthropist. Unfortunately he fell into business with Viktor Kozeny, the Pirate of Prague. The government charged Kozeny and Bourke with conspiring in a scheme to illegally purchase the state-owned oil company of Azerbaijan, SOCAR, by bribing the Azerbaijani president and other government officials. […]