United States v. Kozeny
2008 U.S. Dist. LEXIS 85443, 2008 WL 4658807, 582 F. Supp. 2d 535 (2008)
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Rule of Law:
Under the Foreign Corrupt Practices Act (FCPA), a foreign law that relieves a person from criminal responsibility for an otherwise illegal bribe payment, such as for reasons of extortion or subsequent reporting, does not render the payment itself "lawful" for the purposes of the FCPA's affirmative defense.
Facts:
- In the mid-1990s, the Republic of Azerbaijan initiated a program to privatize its state-owned oil company, SOCAR.
- The President of Azerbaijan, Heydar Aliyev, possessed discretionary authority over the privatization process.
- Frederic Bourke, Jr. and others were alleged to have made payments to officials in Azerbaijan.
- The alleged purpose of these payments was to encourage the privatization of SOCAR and to ensure they would be allowed to participate in it.
- Bourke contended that the payments were the product of extortion by Azeri officials.
- Bourke also claimed that he had reported the payments to the President of Azerbaijan, which he argued excused any criminality under Azeri law.
Procedural Posture:
- The United States government brought a criminal prosecution against Frederic Bourke, Jr. in the United States District Court for the Southern District of New York.
- During pre-trial proceedings, Bourke filed a motion requesting the court to determine the content of applicable law in Azerbaijan.
- Bourke sought a jury instruction on an affirmative defense under the FCPA, arguing his payments were legal under Azeri law due to extortion and subsequent reporting.
- The Government and Bourke submitted conflicting expert reports and testimony regarding the interpretation of Azeri bribery laws.
- The court held a hearing to resolve the dispute over the content of the foreign law.
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Issue:
Does a provision in a foreign country's law that relieves a person from criminal responsibility for bribery, either because the bribe was extorted or subsequently reported, render the bribe payment "lawful under the written laws" of that country for the purposes of the FCPA's affirmative defense?
Opinions:
Majority - Scheindlin, J.
No. A foreign law provision that relieves a payer of criminal responsibility does not make the underlying bribe payment lawful for the purposes of the FCPA's affirmative defense. The court's reasoning distinguishes between the legality of the payment and the culpability of the payer. The FCPA's defense requires the payment itself to be lawful under the foreign country's written laws. The relevant Azeri law, Article 171, merely relieves a person from responsibility if they report the bribe or were extorted; it does not retroactively legalize the illicit payment. The court found this interpretation is supported by the fact that the bribe-giver is not considered a victim and cannot claim restitution of the bribe money. Furthermore, the purpose of the Azeri law is to aid in the prosecution of the corrupt official who received the bribe, which would be impossible if the payment were deemed lawful. The court analogized this to a statute of limitations, which bars prosecution but does not render the original criminal act lawful.
Analysis:
This decision significantly narrows the scope of the FCPA's affirmative defense based on foreign law. It establishes that a defendant cannot rely on foreign procedural rules, amnesties, or liability waivers that excuse a payer to argue that the underlying bribe payment was lawful. The ruling clarifies the critical distinction between an act being affirmatively legal and an actor being excused from prosecution for that act. This forces defendants to demonstrate that the foreign jurisdiction's written laws explicitly permit such payments, a much higher burden, thereby strengthening the FCPA's enforcement against bribery disguised by foreign legal technicalities.
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