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23 e the third party became part of the transaction at the express request or insistence of the foreign official; e the third party is merely a shell company incorpo- rated in an offshore jurisdiction; and e the third party requests payment to offshore bank accounts. Businesses may reduce the FCPA risks associated with third-party agents by implementing an effective com- pliance program, which includes due diligence of any pro- spective foreign agents. United States v. Kozeny, et al. In December 2011, the U.S. Court of Appeals for the Second Circuit upheld a conscious avoidance instruction given during the 2009 trial of a businessman who was convicted of conspiring to violate the FCPA’s anti-bribery provisions by agreeing to make payments to Azeri officials ina scheme to encourage the privatization of the Azerbaijan Republic’s state oil company. The court of appeals found that the instruction did not lack a factual predicate, citing evidence and testimony at trial demonstrating that the defendant knew corruption was pervasive in Azerbaijan; that he was aware of his business partner’s reputation for misconduct; that he had created two U.S. companies in order to shield himself and other investors from potential liability for payments made in violation of the FCPA; and that the defendant expressed concerns during a conference call about whether his business partner and company were bribing officials. The court of appeals also rejected the defendant's contention that the conscious avoidance charge had improperly permitted the jury to convict him based on negligence, explaining that ample evidence in the record showed that the defendant had “serious concerns” about the legality of his partner’s business practices “and worked to avoid learning exactly what [he] was doing,” and noting that the district court had specifically instructed the jury not to convict based on negligence. What Affirmative Defenses Are Available? The FCPA’ anti-bribery provisions contain two affir- mative defenses: (1) that the payment was lawful under the written laws of the foreign country (the “local law” defense), and (2) that the money was spent as part of demonstrating a product or performing a contractual obligation (the “reason- able and bona fide business expenditure” defense). Because these are affirmative defenses, the defendant bears the burden of proving them. The Local Law Defense For the local law defense to apply, a defendant must establish that “the payment, gift, offer, or promise of any- thing of value that was made, was lawful under the writ- ten laws and regulations of the foreign official’s, political party’s, party official's, or candidate’s country.’ “! The defen- dant must establish that the payment was lawful under the foreign country’s written laws and regulations at the time of the offense. In creating the local law defense in 1988, Congress sought “to make clear that the absence of written laws in a foreign official’s country would not by itself be suf ficient to satisfy this defense.’ Thus, the fact that bribes may not be prosecuted under local law is insufficient to establish the defense. In practice, the local law defense arises infrequently, as the written laws and regulations of coun- tries rarely, if ever, permit corrupt payments. Nevertheless, if a defendant can establish that conduct that otherwise falls within the scope of the FCPA’s anti-bribery provisions was lawful under written, local law, he or she would have a defense to prosecution. In United States v. Kozeny, the defendant unsuccess- fully sought to assert the local law defense regarding the law of Azerbaijan. The parties disputed the contents and appli- cability of Azeri law, and each presented expert reports and testimony on behalf of their conflicting interpretations. The court ruled that the defendant could not invoke the FCPA’s affirmative defense because Azeri law did not actually legal- ize the bribe payment. The court concluded that an excep- tion under Azeri law relieving bribe payors who voluntarily HOUSE_OVERSIGHT_022525