This article first appeared in the Richard Bistrong FCPA Blog and is republished with the permission of Richard Bistrong.
Today we welcome Kristine Robidoux, Partner, Gowlings, for a view of anti-bribery and compliance issues from Canada.
RB: Hello Kristine, thank you for joining me in today’s interview, as we try to share some of the issues confronting individual’s and corporations who are subject to Canadian anti-corruption laws. But first, perhaps you share some of your background:
KR: Richard, thank you so much for this opportunity to discuss the latest developments in Canada in respect of the ongoing fight against domestic and foreign corruption “up north”. There is certainly a lot going on in Canada on this front, from policy, legislative and enforcement perspectives, and in terms of the approach to compliance being taken by our clients.
I am a partner with the Gowlings firm in Calgary, where I practice in the area of white collar defence, investigations and compliance. I came to the “Big Firm” practice of law through a bit of a bizarre career trajectory: I started as a criminal defence lawyer in a small firm, then became a General Counsel and then a Director of Ethics and Compliance before I started my own corporate ethics and compliance consulting firm. I joined Gowlings in 2008, and since then, have specialized in the prevention, detection and defence of white collar and ethics cases, both domestic and transnational in nature.
RB: So, what is the current enforcement environment in Canada, and has that changed in recent years?
KR: The enforcement climate in Canada certainly has changed in recent times. Significantly, Canada was one of only 2 countries to improve its ranking (from “Limited Enforcement” to “Moderate Enforcement”) in Transparency International’s 2014 progress report. This probably has much to do with the fact that the Royal Canadian Mounted Police (“RCMP”) has made a concerted effort to increase and better align its resources so that more Corruption of Foreign Public Officials Act (“CFPOA”) cases can be pursued more efficiently, and due to the fact that a couple of major prosecutions have now taken place. For example, Niko Resources was prosecuted in 2011 for bribes paid in Bangladesh (fine: $9.5 million) and Griffiths Energy International was prosecuted in 2013 for bribes paid to the Chadian Ambassador to the US and Canada in 2013 (fine: $10.35 million). As far as Canadian corporate criminal penalties go, fines at these levels are considered significant. Those cases served as a wake-up call for Canadian businesses operating overseas, and they also seemed to give the RCMP a boost of confidence and some recognition by the international community that Canada was starting to take its enforcement responsibilities more seriously. Then, in 2014 we saw another watershed case, where the first individual to be convicted under the CFPOA after a trial (for conspiracy to bribe foreign officials in connection with the Cryptometrics case) was sentenced to a term of 3 years of federal incarceration. Again, a jail sentence of this length would certainly not go unnoticed, and served to reinforce the message that Canada’s enforcement agencies are treating offences of foreign bribery very seriously.
RB: Do you see a focus on individuals, corporations, or both?
KR: The RCMP seems to have stopped its earlier practice of publicly announcing the number of open foreign bribery cases, so it’s hard to say whether the pendulum might swing back, but at this moment, I would say that there seems to be a focus on the prosecution of individuals. As mentioned earlier, the first individual charged under the CFPOA was found guilty after trial and has been sentenced to jail. But there are others. In connection with the lengthy and wide-ranging investigation of Canadian engineering and construction giant SNC-Lavalin, the RCMP has brought charges against five individuals to date in connection with the Padma Bridge project in Bangladesh (although one of those individuals, the former Bangladeshi government official allegedly involved in exerting influence over the bridge project, saw his charges stayed by a Canadian court last year due to lack of jurisdiction over him). The four others are awaiting trial. And in connection with the Cryptometrics case referred to earlier, in addition to the one individual presently serving out his sentence, there are charges pending against three others (the Cryptometrics former CEO, the former CFO, and the former agent… interestingly, they are all foreign nationals). We are continuing to watch with great interest, because notwithstanding the existence of charges against individuals connected with these cases, there have not yet been any corporate charges. I would be surprised if there weren’t charges brought against the companies eventually, but to date there has been no public indication as to whether or when that might occur. Another corporation that may face charges this year is TSX-listed mining company MAG Industries, who just issued a press release on January 29 that the RCMP had conducted a search and seizure at its corporate offices in connection with alleged corrupt payments in the Republic of Congo.
RB: What do you see as Canada’s role in engaging in international law-enforcement and prosecutorial cooperation?
KR: I believe Canada has an obligation to assist in international investigations, and in my experience, Canada appears to work very effectively with its international counterparts. I observed first-hand the interaction and cooperation between Canadian and US investigators and prosecutors on a number of my cases and the relationship appears to be healthy. There appears to be a great deal of communication between the two countries.
RB: Kristine, what about companies? Here is the US, there is much debate about the “rogue employee” script, which the OECD Bribery Report clearly addresses when it demonstrates that in many cases upper level management knew of the bribes. Where is that debate in Canada?
KR: It’s hard to say where that debate is at, frankly. There simply haven’t been enough enforcement cases to be able draw any kind of patterns or conclusions about the attitudes of the enforcement agencies in that regard. But while I do believe that truly “rogue” employees can and do exist, my sense is that companies are not using the “invisibility cloak” to avoid the hard discussion about whether a rogue employee might be out there and what the board needs to do to ensure he or she is not out there. Our law provides that if the offence is carried out by a company’s “senior representative” (which, given its definition in our Criminal Code, may include a company’s foreign country manager – whether “rogue” or not), then the company becomes a party to the offence. As a result, I am seeing Canadian boards of directors and management teams increasingly rolling up their sleeves to effectively and properly discharge their obligations to ensure the business is being run ethically overseas. In the past, there may have been more of a willingness to rely on the in-country management’s verbal reassurances that “everything was OK”, and to stop short of asking the tough questions or verifying compliance externally, but that is not happening anymore.
RB: What are some of the greater challenges facing Canadian companies and their international teams who operate in high risk (low integrity) regions?
KR: One of the greatest risks may be simply that Canada hasn’t had foreign bribery squarely on the enforcement radar as long as the US and so perhaps education levels are still catching up to where they need to be. We are an entrepreneurial culture, and our resource companies (in particular) courageously enter some of the most daunting foreign markets around the world. We are also believed by many to be a very polite, deferential and culturally sensitive people. This can actually be a bit of a dangerous recipe, when you think about it.
If Canadians enter a high risk market and, in an effort to be deferential and polite, simply accept the local jurisdiction’s assertions that “this is the way we do business here”, and they don’t have sufficient education about foreign bribery risks and how to mitigate them, the results can be disastrous. The answer is to continuously promote and communicate the message of compliance and ethics, and for companies to ensure their on-the-ground personnel are well equipped to handle the inevitable requests for cash, gifts and favours.
RB: Any other thoughts?
KR: There are three more Canadian developments which may be of interest to your readers, Richard, particularly to those who may be involved in the oil and gas or mining sectors. First, Canada recently passed the Extractive Sector Transparency Measures Act (which is expected to come into force in early 2015) to require resource companies to report on payments it makes to governments, both domestically and internationally, as well as government agencies and similar bodies carrying out governmental functions. The list of payments to be reported is broad. Importantly, after a two-year transition period, the reporting requirement will also extend to payments made to Aboriginal governments in Canada. The Act provides for significant penalties for companies and their officers and directors in cases of non-compliance, so your readers should ensure that they are well informed about the specifics of the reporting obligations.
Second, Canada recently (November 2014) announced its enhanced Corporate Social Responsibility strategy. The strategy reiterates Canada’s commitment to international best practices in CSR, including those related to foreign bribery and corruption, and provides that resource companies that do not comply may lose diplomatic support and financing or other support from Export Development Canada.
And third, of interest to all companies interested in bidding on Canadian federal government projects and procurement, will be the implementation of Public Works and Government Services Canada’s Integrity Framework. (“PWGSC”, the Government of Canada department responsible for coordinating all of the federal government’s managed contracts and real property transactions, including construction contracts, goods and services contracts, etc., wields a very big stick indeed!)The Integrity Framework will essentially debar any supplier from doing business with PWGSC if it or an affiliate is convicted or pleads guilty to an offence, even if the conviction or guilty plea results in a conditional or absolute discharge at sentencing.
These offences apply to acts committed in Canada as well as to convictions received abroad, and “affiliates” include parent companies, subsidiaries and directors, as long as they have control of one another, or if they are under the common control of a 3rd party. In this way, it is anticipated that Hewlett-Packard Canada, one of the leading technology suppliers to the Government of Canada, will find itself debarred as a result of the guilty plea in the US of Hewlett Packard’s Russian and Mexican subsidiaries, notwithstanding the lack of any complicity by the Canadian subsidiary. The debarment period is 10 years from the date of conviction and further, the application of the policy is retroactive: a company can be debarred as a result of a conviction dating back up to 10 years.
Germany-based Siemens has already received official confirmation of debarment by PWGSC. At present, the debarment process does not include discretionary provisions: there is no ranking system of offence and no opportunity to demonstrate that the corporation has undergone restructuring or implemented risk-mitigation strategies, such as a compliance program, to reduce the length of the debarment period. The Framework’s wide reach and severe penalties have not gone unnoticed and have been the subject of lobbying efforts by members the business community. In response, the Government of Canada has recently re-engaged with various stakeholders to address the provisions and application of the Framework. So stay tuned, there may be further changes!
Thank you for this opportunity to connect with you and your readers, Richard. Feel free to reach out anytime for further insights into the ethics and compliance environment north of the 49th!