Several recent posts have highlighted various 2013 Foreign Corrupt Practices Act enforcement statistics. Future posts will continue the number crunching on individual FCPA enforcement statistics.
Today however, we pause and look north to Canada for a year in review by the Canada Expert for FCPA Professor, Mark Morrison (Blake, Cassels & Graydon), and Blake attorneys Matthew Huys and Michael Dixon.
2013 was a bellwether year for Canadian anti-corruption law and enforcement. On June 19, 2013 the Canadian government passed into law amendments to the Corruption of Foreign Public Officials Act (CFPOA) that significantly strengthen Canada’s primary foreign anti-corruption legislation. Additionally, 2013 has seen a number of prominent enforcement proceedings, including Canada’s largest fine for a CFPOA conviction to date, as well as the first trial and conviction of an individual under the CFPOA.
This post discusses recent enforcement proceedings and amendments to the CFPOA in turn.
Recent Enforcement Proceedings
Canadian authorities continue to focus on enforcing the CFPOA. As noted above, 2013 has seen the largest fine to date for a conviction under the CFPOA, the first trial and conviction of an individual under the CFPOA, the ongoing investigations into SNC-Lavalin Group Inc. (SNC-Lavalin) and its affiliates, and the corruption allegations against a large number of municipal officials and members of the construction industry in Quebec. Notable enforcement proceedings are discussed below.
Griffiths Energy - The Griffiths Energy case is the second major conviction under the CFPOA. In January 2013, Griffiths pled guilty to the bribery offence under section 3(1)(b) of the CFPOA and agreed to pay a fine of $9M, plus a 15% victim surcharge, for a total of $10.35M. This fine was in relation to consulting agreements that provided for payments in the amount of $2M to two entities owned and controlled by Chad’s ambassador to Canada and his spouse. In assessing the fine, the Court noted as mitigating factors that Griffiths had self-reported, taken the extraordinary step of sharing privileged materials, spent $5M conducting an internal investigation into the bribery, and had to postpone its planned IPO at a cost of $1.8M.
Karigar Conviction- On August 15, 2013 the Ontario Supreme Court released its decision in the trial of Nazir Karigar, the first individual charged under the CFPOA. Mr. Karigar was a former employee of Cryptometrics, a company developing facial recognition software for airports and governments. The RCMP laid charges against Mr. Karigar individually, alleging that he violated the CFPOA by paying bribes totalling $450,000 to an Indian minister and Air India officials in relation to a security system contract. Notably, the trial judge convicted Mr. Karigar notwithstanding that there was no evidence that bribes were actually offered or paid, holding that section 3 of the CFPOA also prohibits any conspiracy or agreement to bribe foreign public officials. A sentencing hearing in Mr. Karigar’s case is expected to be scheduled in the near future. A more detailed summary of the Karigar decision can be found here.
Investigation into SNC-Lavalin -The investigation into SNC-Lavalin and its subsidiaries remains ongoing. On September 1, 2011 the RCMP raided its offices in connection with a corruption probe into the bidding process for the World Bank funded Padma Bridge Project in Bangladesh. On April 11, 2012, Ramesh Shah and Mohammad Ismail, two former executives of SNC-Lavalin, were charged with one count each of corruption under the CFPOA. Another former executive of SNC-Lavalin, Kevin Wallace, was charged on September 18, 2013. In addition, two former executives, including a former CEO, are facing fraud charges relating to a contract for a multi-billion dollar health facility in Montreal.
Corruption Inquiry in Quebec - The Charbonneau Commission inquiry into corruption in the management of public construction contracts in Quebec is ongoing. While the final report of the Charbonneau Commission Inquiry is not expected until Spring 2015, the inquiry has heard testimony of rampant corruption in municipal contracting in Quebec. There have been wide-ranging allegations against a large number of municipal officials, suggesting that they accepted bribes to award municipal construction contracts. Notably, allegations of corruption have resulted in the resignation of the former mayors of Montreal, Michael Applebaum and Gerald Tremblay, in addition to the resignation of the Mayor of Laval, Gilles Vaillancourt. Additionally, there have been allegations of collusion on the part of engineering and construction firms in bidding on municipal contracts.
Ongoing RCMP Investigations -In addition to the foregoing matters, the RCMP has also made it known that it has 34 active and ongoing CFPOA investigations.
Amendments to the CFPOA
The amendments to the CFPOA close significant loopholes, create new offences, and increase penalties for violating its provisions. They include:
Nationality Jurisdiction – Prior to the amendments, the CFPOA contained a significant loophole with the application of territorial jurisdiction. Territorial jurisdiction created enforcement difficulties as there had to be a territorial nexus between Canada and the offence for the CFPOA to apply, meaning that some part of the formulation, initiation, or commission of the offence must have taken place within Canada. Considering that the CFPOA is directed at transactions that predominantly occur abroad, territorial jurisdiction hampered the ability of Canadian authorities to enforce the CFPOA in cases where the entire transaction occurs abroad.
The amendments closed the territorial jurisdiction loophole by employing nationality jurisdiction in a similar manner as other global anti-corruption legislation, such as the United States Foreign Corrupt Practices Act (FCPA). The relevant provision deems acts of Canadian citizens, permanent residents, corporations, societies, firms or partnerships on a worldwide basis to be acts within Canada for the purposes of the CFPOA. This provision essentially subjects all Canadian citizens and companies to global regulation by Canadian authorities under the CFPOA.
Increased Penalties – The amendments significantly increased the penalties for violations of the CFPOA. Maximum imprisonment for violation of the CFPOA is now 14 years, as opposed to five years prior to the amendments.
Books and Records Offence – New offences now exist for concealing bribery in accounting records. Pursuant to the new books and records provisions, it is an offence to keep secret accounts, falsely record, not record or inadequately identify transactions, enter liabilities with incorrect identification of their object, use false documents, or destroy accounting books and records earlier than permitted by law for the purpose of concealing bribery of a public official. Similar to the bribery offence under the CFPOA, the new books and records provisions carry a maximum sentence of 14 years’ imprisonment.
While this new offence has some similarity to the books and records provisions of the FCPA, it is not likely to have the same impact in Canada as it has had in the United States, as in Canada the new books and records provisions are criminal, meaning both that the authorities must prove an offence to the higher standard of proof, and also that there is no civil resolution option provided under the CFPOA.
No Facilitation Payments –Under the amendments, the current exception in the CFPOA for facilitation payments will be removed. The timing for removal of such exception is subject to a further order of the Governor in Council.
No For-Profit Requirement – Prior to the amendments, application of the CFPOA was restricted to for-profit transactions. This allowed for potential arguments that any particular payment did not violate the CFPOA because it was not directly tied to a for-profit purpose. Under the amendments, this potential argument is no longer available as the for-profit restriction has been removed.
Double Jeopardy – Previously, the CFPOA did not specifically address the potential availability of double jeopardy protection in circumstances involving prosecutions for the same conduct in different jurisdictions (for instance, in the United States under the FCPA). While common law arguments for such protection did exist, the availability of a double jeopardy defence based on the principles of autrefois acquit or autrefois convict was by no means certain. The amendments now clarify this uncertainty and ensure that Canadian companies and individuals tried in another jurisdiction cannot be convicted for the same conduct in Canada.
For a further summary of the amendments to the CFPOA, please see here.
The trend of increased focus on anti-corruption compliance and enforcement in Canada has continued in 2013. This trend will likely continue with the recent amendments to the CFPOA, active investigations by the RCMP, and the continued emphasis on anti-corruption compliance in the media and in Canadian board rooms.