Wednesday, July 22, 2009

The Bourke Jury Instructions

As those who follow the FCPA are already aware, Frederic Bourke, Jr. was recently found guilty by a federal jury of (among other charges) conspiracy to violate the FCPA for his role in a scheme to bribe "foreign officials" in Azerbaijan in connection with the privatization of the State Oil Company of Azerbaijan. See here for the DOJ News Release.

Contrary to numerous media reports, Bourke was not on trial for "violating the FCPA" (the original indictment against Bourke contained substantive FCPA charges, however the superseding indictment removed the substantive FCPA charges in favor of conspiracy charges).

Regardless, the Bourke trial was closely followed by the FCPA bar as FCPA trials are very rare. Because FCPA trials are rare, so too are FCPA jury instructions. The Bourke jury instructions (see here) provide for an interesting, albeit frustrating, read. In instructing the jury on the conspiracy counts, the jury was instructed on the seven elements of an FCPA violation.

"Big picture" these FCPA instructions (which begin on Pg. 23 and which the jury was duty-bound to accept) are a mess.

The problem starts with the second element "interstate commerce" and contains a fundamental misstatement of the law. The instructions say (on pg. 24) that a "domestic concern" (as Bourke is under FCPA-speak) "must have intended to make use of the mails or a means or instrumentality of interstate commerce" in order to violate the FCPA. This is the so-called "territorial" jurisdictional provision found at 78dd-2. However, the 1998 amendments to the FCPA expanded the jurisdictional reach of the FCPA, as applied to "domestic concerns," by adding an alternative "nationality" jurisdictional provision found at 78dd-2(i) which removes the interstate commerce / U.S. territorial nexus requirements. Thus, a "domestic concern" can be charged and found liable for a substantive FCPA violation even if the prohibited activity took place entirely outside of the U.S. The jury instruction that the "domestic concern" "must have intended to make use of the mails or a means or instrumentality of interstate commerce" is thus just plain wrong.

The second problem is found in what the instructions say is the fifth element of a substantive FCPA violation - the knowledge of payment to a foreign official. The instructions say (on pg. 26-27) that a "foreign official" is: (1) an officer or employee of a foreign government; (2) any department, agency, or instrumentality of such foreign government, or (3) any person acting in an official capacity for or on behalf of such government or department, agency, or instrumentality. So far so good as the instruction merely tracks the language of 78dd-2(h)(2). The problem is the next sentence of the instruction - "[a]n 'instrumentality' of a foreign government includes government-owned or government-controlled companies" (see pg. 27).

Where did that come from? Certainly not the text of the FCPA, as the statute does not define the term "instrumentality." While it is true the the Department of Justice and the Securities and Exchange Commission take the position that government-owned or government-controlled companies are "instrumentalities" of a foreign government and that all employees of such companies (regardless of rank or title) are thus "foreign officials" under the FCPA, this is an unchallenged and untested legal theory.

As I am exploring in a current work-in-progress, DOJ/SEC's aggressive interpretation of the "foreign official" element - to include employees of government-owned or government-controlled companies - is ripe for challenge in that it is, among other things, not supported by the FCPA's extensive legislative history and is undermined by reference to other U.S. statutes which cover foreign or domestic government instrumentalities. Another way to look at it is this way - if the DOJ/SEC's interpretation were to be applied in an intellectually honest fashion, would not all GM or AIG employees be considered U.S. "foreign officials" because the U.S. government owns or controls those companies?

A further problem with the instructions, is that even accepting the broadness by which the instructions define "foreign official" that term is not used consistently throughout the instructions. For instance, in discussing the sixth element of an FCPA violation - purpose of payment, the instructions interchangeably use the terms "foreign official" and "foreign public official." (see Pg. 28). Even more confusing is that the instructions, when discussing that solicitation of a bribe is not a defense, (see Pg. 29) say that "[i]t is not a defense that the payment was demanded by a government official as a price for gaining entry into a market or to obtain a contract or other beneift." Thus, literally in the span of three pages, the instructions refer to the key "foreign official" element of an FCPA violation three different ways - "foreign official," "foreign public official," and "government official" even though the later two terms appear nowhere in the statute.

What a mess!


  1. With respect to your first critique of the jury instructions, did you consider that the charged conduct largely predates the 1998 amendments to the FCPA?

  2. Good question. Yes I did consider this. My understanding is that the 1998 amendments became effective November 10, 1998. The superceding indictment against Bourke, specifically the conspiracy to violate the FCPA charge, alleges post-November 1998 conduct.

  3. Not so fast! The statutory charge for the conspiracy count does allege conduct continuing to in or about 1999, but the only post November 10, 1998 overt acts are two trips in January and February 1999, one by Farrell and the other by Bourke, to meet with Azeri officials concerning the privatization investment. The indictment does not charge any particular act in furtherance during those trips, and in the original indictment none of the substantive acts involved post-Nov. 1998 transactions. Thus, the the government may well have deliberately chosen to play it safe and have the court instruct on the pre-98 amendment jurisdictional element.

  4. Thanks for your contribution Phil. The problem as I see it (and as Richard Cassin pointed out recently in his FCPA Blog) is that the Bourke jury instructions are being used verbatim in other FCPA cases where the conduct at issue is exclusively post Nov. 1998 - and not a mix of pre and post Nov. 1998 conduct as in the Bourke case.