Business Crimes Hotline

NEW YORK

Frederic Bourke Sentenced to One Year in Jail After FCPA Trial

Judge Shira Scheindlin of the United States District Court for the Southern District of New York sentenced Frederic Bourke ' co-founder of Dooney & Bourke, a maker of high-end handbags ' to one year and one day in jail and fined him $1 million.

Originally indicted in 2005 along with alleged Czech co-conspirator Viktor Kozeny, Bourke, according to the government, was involved in a scheme to obtain control of Azerbijan's state-owned oil company, Socar, using bribery.

The United States government alleged that Bourke invested $8 million in Kozeny's company, Oily Rock, Ltd., and that the investment consortium conspired to pay or paid millions of dollars to Azeri officials to obtain a controlling interest in Socar. According to the government, Bourke knew that, in June 1998, Kozeny arranged to increase the authorized share capital by $300 million in order to use those funds to bribe Azeri officials. In addition, the government alleged that Bourke lied to the FBI by disclaiming knowledge of the payments during interviews.

Bourke had been convicted in July after a six-week jury trial, of conspiracy to violate the FCPA and making false statements. He was, however, acquitted of money-laundering charges.

As a part of the sentence, Bourke will have to serve three years of supervised release after the conclusion of his prison term. Bourke's attorney said that he would appeal to the Second Circuit.

Hedge Fund Managers Found Not Guilty of Fraud

A jury in the Eastern District of New York found Matthew Tannin and Ralph Cioffi, two Bear Stearns hedge fund managers, not guilty of fraud.

The hedge funds managed by Cioffi and Tannin failed in the summer of 2007, costing investors $1.6 billion. Tannin and Cioffi were arrested in June 2008 on allegations that they lied about the stability of the funds. The government's case rested primarily on internal e-mails it claimed showed knowledge that the funds were in trouble even as Tannin and Cioffi were promoting their potential to investors.

The jury also found Cioffi not guilty of insider trading. The government had alleged that he took $2 million of his own money out of one of the failing funds while telling investors that he was investing more.

TEXAS

Enron Broadband Executive Sentenced to Home Confinement

U.S. District Judge Vanessa Gilmore sentenced former Enron broadband finance chief Kevin Howard to one year of probation, including nine months of home confinement, as a result of his plea deal with the government. Under the sentence, Howard will also pay a $25,000 fine.

At the time of his plea, Howard had already been tried twice. His original 2005 trial ended in a hung jury, although several co-defendants were acquitted. He was convicted in his second trial in 2006, but Judge Gilmore later threw out the convictions because of subsequent rulings by the Fifth Circuit addressing the “honest-services” fraud provision under which Howard was convicted. The government had alleged that Howard misled an investor in relation to the risk associated with the sale of futures for a video-on-demand business in 2000. The investor ultimately lost its money after the Enron bankruptcy. Howard pleaded guilty to one count of falsifying books and records. The prosecution stipulated that Howard did not personally benefit from the crime.

Business Crimes Hotline was written by Associate Editor Kenneth S. Clark, an associate at Kirkland & Ellis LLP, Washington, DC. In the Courts was written by Matthew Alexander, an associate in the same office.

NEW YORK

Frederic Bourke Sentenced to One Year in Jail After FCPA Trial

Judge Shira Scheindlin of the United States District Court for the Southern District of New York sentenced Frederic Bourke ' co-founder of Dooney & Bourke, a maker of high-end handbags ' to one year and one day in jail and fined him $1 million.

Originally indicted in 2005 along with alleged Czech co-conspirator Viktor Kozeny, Bourke, according to the government, was involved in a scheme to obtain control of Azerbijan's state-owned oil company, Socar, using bribery.

The United States government alleged that Bourke invested $8 million in Kozeny's company, Oily Rock, Ltd., and that the investment consortium conspired to pay or paid millions of dollars to Azeri officials to obtain a controlling interest in Socar. According to the government, Bourke knew that, in June 1998, Kozeny arranged to increase the authorized share capital by $300 million in order to use those funds to bribe Azeri officials. In addition, the government alleged that Bourke lied to the FBI by disclaiming knowledge of the payments during interviews.

Bourke had been convicted in July after a six-week jury trial, of conspiracy to violate the FCPA and making false statements. He was, however, acquitted of money-laundering charges.

As a part of the sentence, Bourke will have to serve three years of supervised release after the conclusion of his prison term. Bourke's attorney said that he would appeal to the Second Circuit.

Hedge Fund Managers Found Not Guilty of Fraud

A jury in the Eastern District of New York found Matthew Tannin and Ralph Cioffi, two Bear Stearns hedge fund managers, not guilty of fraud.

The hedge funds managed by Cioffi and Tannin failed in the summer of 2007, costing investors $1.6 billion. Tannin and Cioffi were arrested in June 2008 on allegations that they lied about the stability of the funds. The government's case rested primarily on internal e-mails it claimed showed knowledge that the funds were in trouble even as Tannin and Cioffi were promoting their potential to investors.

The jury also found Cioffi not guilty of insider trading. The government had alleged that he took $2 million of his own money out of one of the failing funds while telling investors that he was investing more.

TEXAS

Enron Broadband Executive Sentenced to Home Confinement

U.S. District Judge Vanessa Gilmore sentenced former Enron broadband finance chief Kevin Howard to one year of probation, including nine months of home confinement, as a result of his plea deal with the government. Under the sentence, Howard will also pay a $25,000 fine.

At the time of his plea, Howard had already been tried twice. His original 2005 trial ended in a hung jury, although several co-defendants were acquitted. He was convicted in his second trial in 2006, but Judge Gilmore later threw out the convictions because of subsequent rulings by the Fifth Circuit addressing the “honest-services” fraud provision under which Howard was convicted. The government had alleged that Howard misled an investor in relation to the risk associated with the sale of futures for a video-on-demand business in 2000. The investor ultimately lost its money after the Enron bankruptcy. Howard pleaded guilty to one count of falsifying books and records. The prosecution stipulated that Howard did not personally benefit from the crime.

Business Crimes Hotline was written by Associate Editor Kenneth S. Clark, an associate at Kirkland & Ellis LLP, Washington, DC. In the Courts was written by Matthew Alexander, an associate in the same office.