The Government's theory at trial in Kozeny was that the defendant there (actually one Bourke) acted knowingly -- that he knew what he was doing was illegal. The district court gave the following instruction, presumably at the request of the Government:
The FCPA provides that a person's state of mind is knowing with respect to conduct, a circumstance, or a result if, and I'm quoting from the statute, the FCPA, if such person is aware that such person is engaging in such conduct; that such circumstance exist [sic] or that such result substantially is certain to occur, or such person has a firm belief that such circumstances exist or that such result is substantially certain to occur. That's the end of the quote.
When knowledge of existence of a particular fact is an element of the offense, such knowledge may be established when a person is aware of a high probability of its existence, and consciously and intentionally avoided confirming that fact. Knowledge may be proven in this manner if, but only if, the person suspects the fact, realized its high probability, but refrained from obtaining the final confirmation because he wanted to be able to deny knowledge.
On the other hand, knowledge is not established in this manner if the person merely failed to learn the fact through negligence or if the person actually believed that the transaction was legal.After recounting the evidence that the defendant knew of the crimes, the Court then addressed the defendant's argument that, where the claim is that he knew, the conscious avoidance instruction impermissibly permits conviction for negligence. Here's the Court's rejection of that argument:
Of course, this same evidence may also be used to infer that Bourke actually knew about the crimes. See United States v. Svoboda, 347 F.3d 471, 480 (2d Cir. 2003). Relying on Ferrarini, 219 F.3d at 157, Bourke argues that the conscious avoidance charge was given in error because the government argued Bourke actually knew of the bribes. We disagree. In Svoboda, we held that:
the same evidence that will raise an inference that the defendant had actual knowledge of the illegal conduct ordinarily will also raise the inference that the defendant was subjectively aware of a high probability of the existence of illegal conduct. Moreover, [conscious avoidance] may be established where, a defendant's involvement in the criminal offense may have been so overwhelmingly suspicious that the defendant's failure to question the suspicious circumstances establishes the defendant's purposeful contrivance to avoid guilty knowledge.
347 F.3d at 480 (citation, emphasis and internal quotation marks omitted); see also United States v. Carlo, 507 F.3d 799, 802 (2d Cir. 2007) ("The conscious avoidance charge was appropriate because [defendant] asserted that he did not know that his statements were false and the government presented an adequate factual predicate for the charge."); United States v. Aina-Marshall, 336 F.3d 167, 171 (2d Cir. 2003) (approving conscious avoidance charge where defendant "admitted possession of contraband but . . . denied knowledge of its nature," because "the defendant herself has directly put in issue whether the circumstances were such as to alert her to a high probability that the goods were contraband and what steps she took to learn of the extent of that danger").JAT Comment: It looks to me like the Second Circuit approved an alternative argument for conscious avoidance where the Government's case was presented primarily as being a charge of actual knowledge. That, in my mind, is why the conscious avoidance instruction is so dangerous. It permits a conviction for something less that the actual knowledge -- willfulness in a tax crime -- that Congress prescribed as a specific element of the crime. It is not just that the jury might blend negligence into conscious avoidance. Rather, the problem is that Congress never prescribed anything less than actual knowledge -- willfulness in a tax crime -- to constitute the crime. That, to me, is troubling indeed.
It is not uncommon for a finding of conscious avoidance to be supported primarily by circumstantial evidence. Indeed, the very nature of conscious avoidance makes it unlikely that the record will contain directly incriminating statements. Just as it is rare to find direct record evidence of an employer stating, "I am not going to give you a raise because you are a woman," it is highly unlikely a defendant will provide direct record evidence of conscious avoidance by saying, "Stop! I think you are about to discuss a crime and I want to be able to deny I know anything about it!" Here, the evidence adduced by the government at trial suffices to support the giving of a conscience avoidance charge.
Finally, Bourke argues that the conscious avoidance charge improperly allowed the jury to convict him based on negligence, rather than based on evidence that he avoided learning the truth. As detailed above, the record contains ample evidence that Bourke had serious concerns about the legality of Kozeny's business practices and worked to avoid learning exactly what Kozeny was doing. Bourke also argues that the risk of the jury convicting on negligence was heightened here because the district court erroneously admitted the testimony of Wheeler and James Rossman, the attorney also conducting due diligence for Texas Pacific Group ("TPG"). At one time, TPG considered investing with Kozeny, but decided against it. Rossman and Wheeler testified regarding the due diligence they undertook on Oily Rock. Rossman testified that as part of his due diligence, he traveled to Switzerland to meet with Bodmer, and that Bodmer provided Rossman with documents related to the Oily Rock investment. Bodmer also discussed the involvement of the Azeri investors with Rossman. Based on his conversations with Bodmer, and his knowledge of Kozeny's reputation gleaned from news articles, Rossman advised TPGFCPA issue."
We find no grounds supporting the proposition that Wheeler and Rossman's testimony, coupled with the jury charge, allowed Bourke to be convicted based on negligence. The government offered the testimony to demonstrate that others with access to the same sources of information available to Bourke were able to figure out Kozeny's scheme and avoid participating. It was entirely proper for the government to argue that Bourke refrained from asking his attorneys to undertake the same due diligence done by Rossman and Wheeler because Bourke was consciously avoiding learning about the bribes. This is distinguishable from United States v. Kaplan, 490 F.3d 110. Bourke relies on Kaplan for the proposition that a court abuses its discretion when it admits testimony about a third party's knowledge of fraud where "the Government failed to offer evidence that would explain how [the] defendant . . . would have obtained the third parties' knowledge of the criminal scheme." Id. at 121. Here, Bourke went to Azerbaijan on the same trip as Wheeler, and like Rossman had access to Bodmer. This is the type of explanation Kaplan contemplates. Id. ("Evidence of others' knowledge would have been highly relevant had it been supplemented by evidence supporting the conclusion that such knowledge was communicated to [the defendant], or that [the defendant] had been exposed to the same sources from which these others derived their knowledge of the fraud.").
Finally, the district court specifically charged the jury not to convict based on negligence. There is no reason to suspect that the jury ignored that instruction.
By the way, when Congress intended something less that specific knowledge, it well knew precisely how the frame the text. For example, in Section 6015, here, the infamous innocent spouse provision, Congress gave relief where, "in signing the return he or she [the putative innocent souse] did not know, and had no reason to know" of the understatement in tax. Here, it is clear that Congress intended to cover something less than actual knowledge. But, most of the tax criminal sections, Congress used the key word "willfully" and that has been interpreted over many years to mean "intentional violation of a known legal duty." That does not mean knew or should have known. Yet, the conscious avoidance instruction seems to me to permit a jury to so apply the "willfully" element of the tax crime.
But, I rant, so I will get off this now.
Those interested in a schematic of FCPA liability should find this one by Marcus Funk of Perkins Coie useful. See here.