On October 6, 2005, Kozeny, Bourke, and Pinkerton were charged in a 27-count indictment in U.S. District Court for the Southern District of New York. The indictment sought $174,000,000 in fines and forfeiture. Kozeny, an Irish citizen and resident of the Bahamas, has challenged the right of the United States to seek his extradition given that he is neither a U.S. citizen, nor a resident, and was not in violation of an offense under Bahamian law. On September 28, 2006, a court in the Bahamas ordered Kozeny to be extradited, although Kozeny’s lawyers announced that they intended to appeal the order. The Bahamas press reports that, on October 24, 2007, the Bahamas Supreme Court denied the extradition of Kozeny on the grounds that the FCPA charges against Kozeny were not extraditable offenses. On February 13, 2009, the Southern District of New York ordered a freeze of Kozeny’s U.S. assets subject to forfeiture, including proceeds from the sale of a Colorado residence amounting to approximately $23 million. On March 28, 2012, the U.K. Privy Council ruled that Kozeny cannot be extradited from the Bahamas to the U.S. to face the FCPA charges because Kozeny’s alleged bribery did not break any laws in the Bahamas.
On June 21, 2007, the District Court for the Southern District of New York granted the motions to dismiss of Bourke and Pinkerton as to all FCPA counts. The court found that the indictment was time-barred because the government did not move to suspend the running of the statute of limitations to allow it to collect foreign evidence until after the statute of limitations had expired. The court found that filing such an application must be done before the running of the ordinary statute of limitations. The court found, in dicta, that the allegations were otherwise sufficient to withstand a motion to dismiss. Certain false statements counts against the defendants survived the motion to dismiss.
On July 5, 2007, the government moved for reconsideration of the court’s June 21, 2007 decision, arguing that three of the counts of the indictment (including conspiracy to violate the FCPA and the Travel Act and a substantive FCPA violation) should not have been dismissed as time-barred. The court agreed with the government and on July 16, 2007, granted the government’s motion for reconsideration and reinstated these three counts. The government appealed the balance of the court’s June 21, 2007 order to the United States Court of Appeals for the Second Circuit and, on August 29, 2008, the Second Circuit affirmed the district court’s dismissal of the remaining counts.
On September 17, 2008, Bourke filed a motion for the issuance of a Letter Rogatory to the appropriate judicial authority of the Principality of Liechtenstein, requesting international judicial assistance to inspect and obtain evidence to be used at trial. Bourke’s motion was granted on October 17, 2008.
On October 21, 2008, the court issued an order denying Bourke’s motion seeking a jury instruction on the FCPA affirmative defense of lawfulness under written law. Bourke argued that the alleged payments were legal under the written law of Azerbaijan, which provided that a “person who has given a bribe shall be free from criminal responsibility” if the bribe was the product of extortion or was subsequently disclosed. Bourke argued that he was extorted and that he disclosed the payment to the President of Azerbaijan.
The court held that for purposes of the FCPA affirmative defense, the payment must be legal under the written law. The court read the Azeri provision to relieve the bribe payer of criminal responsibility in certain circumstances but that the payment itself remained illegal. The court wrote that “[a]n individual may be prosecuted under the FCPA for a payment that violates foreign law even if the individual is relieved of criminal responsibility for his actions by a provision of foreign law.” The court explained that the payment did not become lawful despite the payor being relieved of criminal liability.
The court also appears to have rejected an argument that economic extortion could be a defense to the statute. Instead, it stated that it would agree to give the jury an instruction on extortion only if the defendant laid a sufficient evidentiary foundation of “true extortion.” In doing so, the district court distinguished between “true extortion” involving threats of injury, death or destruction versus mere demands made in exchange for business from which the defendant could have “walked away.”
Bourke filed a motion for reconsideration, which was denied by the court on December 15, 2008. The court found, first, that Bourke was attempting to raise a proposed instruction not found in his initial motion. Moreover, the court concluded that it need not rule on Bourke’s proposed instruction, which provided the circumstances under which a “mere offer” would not be illegal under Azeri law, because he had not been charged with making a “mere offer.” The court also refused to consider Bourke’s argument that the FCPA has a broader intent element than the “direct intent” required under Azeri law.
Bourke argued that, by being a whistleblower, he interfered in the strategic relationship between the United States and Azerbaijan and, consequently, was the target of a vindictive prosecution. At a hearing on November 17, 2008, Bourke thus requested that the court review internal prosecution documents prepared prior to his charge. Following a motion by Bourke to compel discovery in connection with these allegations, the court ordered that the government disclose to Bourke the grand jury testimony of Clayton Lewis and John Pulley. In addition, the government voluntarily disclosed affidavits and plea agreements from Lewis and Pulley.
On July 1, 2008, the court entered an order of nolle prosequi disposing of the case as to Pinkerton. The government stated that based upon its review of the evidence acquired since the filing of the indictment, further prosecution of Pinkerton would not be in the interest of justice.
On July 10, 2009, after a five week trial, a federal jury found Bourke guilty of conspiracy to violate the FCPA and the Travel Act, as well as of making false statements to the FBI. Bourke was acquitted on a charge of money laundering conspiracy. At trial, the government alleged that Bourke was expressly informed about the bribes, but it also advanced a theory that Bourke consciously avoided information about the bribes so he could deny knowledge.
In support of the theory that Bourke had direct knowledge of the bribes, Hans Bodmer and Thomas Farrell, Bourke’s co-conspirators, testified against him, saying he asked them whether Kozeny was offering enough in bribes.
In support of the theory that Bourke consciously avoided information and was willfully blind, the government introduced a recorded conversation between Bourke, another investor, and their respective attorneys where Bourke asked his attorney what he should do if he became aware that Kozeny was bribing officials. The government also pointed to Bourke’s knowledge of the involvement of government officials in Azerbaijan, a Fortune article referring to Kozeny as the “Pirate of Prague” with respect to a similar scheme, and his dismissal of warnings about corruption in Azerbaijan. The government introduced, over Bourke’s objection, background evidence of the prevalence of corruption in Azerbaijan. In denying Bourke’s motion to preclude this evidence, the court found the evidence made it probable that Bourke was aware Azeri officials were being bribed and was thus relevant and admissible. The court instructed the jury that “knowledge may be established if a person is aware of a high probability of its existence and consciously and intentionally avoided confirming that fact.”
On November 12, 2009, the court sentenced Bourke to one year and one day in prison, followed by three years of supervised release. He also received a fine of $1,000,000 and a special assessment of $200. The court released Bourke on bail pending his appeal to the Second Circuit. Bourke based his appeal primarily on his arguments that 1) the conscious avoidance charge lacked a factual predicate; and 2) the government should not have been allowed to proceed on both an actual knowledge theory and a conscious avoidance theory. On December 14, 2011, the Second Circuit affirmed the jury verdict against Bourke, finding that, while the government’s primary theory at trial was that he had actual knowledge of the bribery scheme, there was ample evidence to support a conviction even based on the alternate theory of conscious avoidance. The Second Circuit also held that the district court correctly permitted the government to proceed on both actual knowledge and conscious avoidance theories. Bourke petitioned for a writ of certiorari with the Supreme Court on October 25, 2012. His petition was denied on April 15, 2013.
Meanwhile, on March 9, 2011, Bourke moved for a new trial based on newly discovered evidence, claiming that statements made by the prosecution at oral argument in the Second Circuit demonstrated that the prosecution knew that Bodmer lied at Bourke’s original trial. On December 15, 2011, the trial court denied Bourke’s motion for a new trial, rejecting Bourke’s contention that the government knowingly permitted the introduction of false testimony. On December 17, 2011, Bourke filed an appeal with the Second Circuit from the trial court’s order denying his motion for a new trial based on newly discovered evidence. On November 28, 2012, the Second Circuit denied Bourke’s request for a new trial. On May 7, 2013, the Second Circuit denied Bourke’s request to rehear the appeal.
In light of the Supreme Court’s denial of his petition for certiorari, the trial court ordered Bourke to report to prison by May 10, 2013. The Federal Bureau of Prisons shows Bourke’s release date as March 22, 2014.
