The stunning $9.5-million fine of Niko Resources for bribing a Bangladeshi official is only the beginning of criminal charges in Canada for corruption of foreign officials, experts say.
As many as 30 foreign corruption cases are now being investigated by the RCMP and fines could easily go higher, says Milos Barutciski, an international trade lawyer with the Calgary-based Bennett Jones law firm.
Canada’s newfound anti-corruption zeal is part of a worldwide push to enforce the rule of law in transborder business. This crackdown has seen record fines worldwide rise from around $100 million six years ago to a new record of $1.6 billion paid by the German engineering conglomerate Siemens for systematic bribery of government officials in a dozen countries.
“Even as a corporate counsel, my hat is off to this initiative,” Barutciski says. “Corruption is the bane of international aid” and routing out foreign “kleptocrats” is one of the reasons the World Bank has become very involved in identifying violators and supporting prosecutions.
Barutciski says Canadian business leaders with foreign operations need to understand that four key trends have become very clear:
• Enforcement in Canada and worldwide has become much more aggressive;
• Fines are huge and rising;
• Canadians doing business in various countries could very easily find themselves facing charges in the United States or the United Kingdom; and,
• There is no double jeopardy protection for foreign corruption charges. This means companies can be charged multiple times in multiple jurisdictions for the same offences. Siemens, for instance, paid $800 million in fines in the U.S. and then received another $800 million in fines from a German court.
Canada passed its Corruption of Foreign Public Officials Act (CFPOA) in 1999 — but never created an enforcement group until pressure from the Organization for Economic Co-operation and Development (OECD) became increasingly intense. (See sidebar) In 2007, Ottawa finally announced the formation of an RCMP International Anti-Corruption Unit with seven officers in Calgary and seven in Ottawa. Barutciski says that group has been “very busy” since its formation and prosecutions are now moving forward.
In addition to filing charges in the Niko case, which the judge called a “dark stain on Calgary’s reputation as the energy capital of Canada,” the RCMP has: executed search warrants against Canadian engineering firm SNC-Lavalin related to possible corruption in the awarding of a contract to build a World Bank-funded $1.2-billion bridge in Bangladesh, opened an investigation of Blackfire Exploration related to charges of bribery of a Mexican public official, brought by anti-poverty groups; and, charged Nazir Karigar, of Ottawa, with attempting to bribe an Indian public official in connection with a multi-million-dollar contract for a security system.
Calgary-based RCMP Staff Sgt. George Prouse confirms Barutciski’s estimate that police are currently working on a total of about 30 corruption cases Canada-wide. He says the new unit started slowly “but I have to say it didn’t take long to get the numbers up.” He also agrees that tools available to the RCMP in investigating offences are extensive.
“Corruption of foreign officials is a federal, indictable offence,” Prouse says, and investigative tools include search warrants, seizure of evidence, arrest of individuals, production orders for third-party evidence, electronic surveillance and co-operation with foreign police forces, such as the FBI.
“You have to be cautious about where you’re doing business,” and be aware of traps that lead to bribery propositions, such as unreasonable delays in permitting. “Don’t get impatient. It’s an easy trap to fall into,” Prouse says. “They key is, be ethical. ‘Bribe’ is a bad word — so it must be a bad thing to do.”
Barutciski observes that, on a per-employee basis, the Niko fine was actually larger than the mammoth fines levied against Siemens. He says Canadian companies need to understand that they could face similar penalties if they violate the CFPOA or fail to take adequate measures to prevent employees or contractors doing so. He says the judge in the Niko case explicitly based his judgment on fines levels in the US.
Moreover, Barutciski says, “the U.S. is keen to take jurisdiction wherever possible” in cases of foreign corruption and “American law is cast in very extraterritorial terms.” The U.S. Foreign Corrupt Practices Act (FCPA) gives its courts jurisdiction over any company anywhere in the world that is listed on an American stock exchange or over any act conducted in furtherance of an offence in the US,” he says. “And they can take a fairly broad view of that. They’ve even said if the bribe is paid in US funds, that could be enough. If there’s a meeting in furtherance of the offence that happens in the US, that could trigger US jurisdiction.” And the new UK Bribery Act is similarly aggressive in giving British courts jurisdiction.
Steve Robertson is a Bennett Jones barrister who says prevention is the best defence against corruption charges. Robertson says this means establishing an effective compliance policy before there’s a problem. And while most large companies know this, he says, their compliance policies are not uniformly solid. A good policy includes periodic audits specifically aimed at detecting corruption, plus measures to educate employees, contractors and agents and to deter them from committing offences.
“Having a policy and responding quickly and decisively (to violations) may limit culpability,” he says.
“By the time you have the police at your door, your options have narrowed considerably and you’re into damage control,” Robertson says. But there are still important things companies can do to limit damages.
The first rule is to co-operate fully with investigators and retain expert legal counsel immediately. He says lawyers will help a company under investigation to protect its interests while at the same time ensuring the best possible relationship with authorities.
He says one example might be providing photo-copy facilities to police, which enables them to conduct their search efficiently and allows the company and its lawyers to get an immediate handle on what information is being seized. This helps the company and its counsel to begin preparing an informed defence far sooner than if they have to wait for charges to be laid, as well as to protect the company’s reputation more effectively. Lawyers can also move to protect documents that may be privileged, as well as the rights of employees and the company, without obstructing the police in their investigation, Robertson says.
“We have a Canadian law that was ignored for the first decade of its existence,” Robertson says. “The RCMP are now peeling the onion” to uncover varying levels of violations and take serious cases to court.
— Brian Burton
© Copyright (c) The Calgary Herald
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