From an FCPA compliance perspective, the recent opinion issued by the Second Circuit Court of Appeals in affirming the conviction in United States v. Bourke provides a number of useful insights. In particular, the Court of Appeals identified a number of factors that may be supportive of a conviction based upon a theory of conscious avoidance. This is sometimes referred to as “willful blindness” or as the “head-in-the-sand” defense.
Awareness of the pervasiveness of corruption in a specific region or country was one of the factors cited. This is consistent with due diligence practices that have been recommended for many years. Whether it be Transparency International’s Corruption Perceptions Index or some other reliable source, consideration must be given to evaluating the nature and pervasiveness of corruption. Such a consideration must inevitably bear upon whether and, if so, how an entity or individual proceeds.
The reputation of one of the key participants in a venture is another factor that the Court of Appeals cited as bearing on a conscious avoidance defense. Again, the due diligence practices that have been advised for many years in the context of the FCPAincludes knowing the background and reputation of the key participants. A failure to conduct such due diligence could bear on conscious avoidance. However, as the Court of Appeals pointed out, conscious avoidance can also arise when one claims an absence of knowledge in proceeding despite knowledge of the questionable reputation of a key participant.
Another factor that the Court of Appeals cited as evidence of conscious avoidance was the creation of U.S. companies and serving on their boards instead of joining the board of the foreign entity more directly involved in the questionable conduct. Where such activity connotes a desire to shield an entity and individual from FCPA liability and yet facilitate participation without actual knowledge, evidence of conscious avoidance may exist. From an FCPA compliance standpoint, the import of this analysis by the Court of Appeals is that structuring transactions to avoid actual knowledge of prohibited conduct may in itself be evidence conscious avoidance the prohibited conduct.