The U.S. Court of Appeals for the Second Circuit recently upheld a "conscious avoidance" instruction which had been given to the jury in a securities fraud case against a former CEO (see, United States v. Adelson).  The Court of Appeals held that "[a] conscious avoidance instruction 'permits a jury to find that a defendant had culpable knowledge of a fact when the evidence shows that the defendant intentionally avoided confirming the fact' - in other words, it allows a jury to 'find . . . knowledge even where there is no evidence that the defendant possessed actual knowledge.'"  "Such an instruction should only be given, however, if '(1) the defendant asserts the lack of some specific aspect of knowledge required for conviction, and (2) the appropriate factual predicate for the charge exists.'"  The appropriate factual predicate showing requires "that there be evidence sufficient to allow a rational juror to conclude 'beyond a reasonable doubt that the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact.'"

The Court held that there was evidence that the CEO repeatedly heard about the company's inability to meet its projections and declining performance, that he spoke with multiple people about the revenue variance, that he received documents that were created for the purpose of showing him the revenue variance, and that nevertheless he continued to report record results to the SEC and the public.  "He avoided learning how these suspicious results were achieved, evidence suggests, by waiving away queries, dismissing those who asked too many questions, and refusing to read documents that detailed the fraud and its implications."