We thought he knew and he definitely should have known.  He’s an investor.  It’s his job to know.  We thought the tape was damning.

Jury foreman David Murphy discussing the conviction of Frederic Bourke Jr. (the co-founder of handbag maker Dooney & Bourke Inc.) of conspiracy to violate the Foreign Corrupt Practice Act in connection with the alleged privatization of the state-owned oil company, Socar, in Azerbaijan as reported through Law.com.

The tape the jury foreman was referring to was a taped phone conversation between Bourke, another investor in the venture, and their lawyer.  The conversation centered on how to structure the deal and the subject of bribery came up.  Bourke’s defense contended that he was merely asking questions about it as part of the due diligence – to verifying the legitimacy of the deal. 

Some of the jurors interpreted it as Bourke knowing about the bribes from the beginning and participating in the creation of dummy companies in an effort to shield himself and the other investors from liability.

The case is expected to be appealed.  But regardless of the outcome, a few lessons are clear:

• Alleged violations of the Foreign Corrupt Practices Act are serious business, and under the new administration more serious than ever.
• Due diligence and legal literacy go hand in hand. Jurors expect investors and managers to be informed. It’s their job.
• What turns a business communication, such as a tape recording, into a smoking gun document is multiple interpretations. It therefore pays to follow smoking gun rule #7 and strive for clarity and accuracy.

Navigating cultural differences is one of the biggest challenges of doing business abroad, particularly since they mask latent legal issues.  If you’ve ever wondered about how to avoid such pitfalls with respect to doing business in greater China, please click here to learn more about my complimentary teleseminar next week with Nicholas V. Chen, a partner with the Pamir Law Group.

©Corporate M.O., LLC 2009