As RCMP quickens activity amid favorable court rulings, Canada bolsters foreign corruption law

In recent years, the conviction of a major Canadian company on foreign bribery charges coupled with a record penalty would have ranked as the year’s biggest Canadian corruption story. This year is different. Legal cases aside, Canada’s more important corruption-related story in 2013 is the overhaul the Canadian parliament and government recently performed on its foreign corruption law, which is called the Corruption of Foreign Public Officials Act, or CFPOA.

In January, Griffiths Energy completed the first voluntary disclosure process for violations of the CFPOA. The large energy company admitted paying a $2 million in bribes to the wife of an African ambassador disguised as consulting fees. Griffiths Energy paid a fine of $10.35 million, the largest ever under the CFPOA.
Griffiths Energy avoided supervised probation, which is a form of a court supervised compliance program, by satisfying prosecutors that it had already implemented a vigorous compliance program at the time of the plea.

By itself, the Griffiths case would have been an important sign of Canada’s renewed focus on combating foreign corruption. It was only the second major conviction under the CFPOA, after that of Niko Resources Inc. in June 2011. The CFPOA was enacted in 1999.

Following the Griffiths conviction, Canada enacted a new, fully revamped CFPOA address most, if not all, earlier criticisms of Canada’s international corruption law.

Not to be overlooked in the fanfare that the new statutory amendments have caused is the first prosecution and conviction on August 15, 2013, of an individual under the CFPOA, in the case of R. v. Karigar. Recent investigations by the Royal Canadian Mounted Police have led to other charges against individuals under the CFPOA, which are now pending in courts.

The new CFPOA

The significant amendments to the CFPOA were proclaimed on June 19, 2013.  Some have characterized the changes to the CFPOA as merely amendments, but in the view of many it is a complete revision of the law. It imposes new penalties, addresses challenges to its jurisdiction and, most importantly, creates new offenses with a clear motive to make these offenses criminal in nature. Thus, Canada has chosen to not follow the so-called “dual track” approach the United States often follows in its Foreign Corrupt Practices Act cases.

The first significant change in the Canadian law is that the maximum prison sentence is increased from five to fourteen years. This lengthening of the sentence illuminates the prospect of “house arrest.”

The second notable change is the use of the nationality concept of jurisdiction. In principle, this concept is similar to the current test used under the US FCPA. It is a change from the use of the prior “real and substantial connection” test and makes clear that the law now applies to all Canadian nationals, including persons or companies operating wholly overseas. The “real and substantial connection” test remains in place but the nationality test also applies.

A third notable change is the prospective elimination of the permissibility of facilitation payments. The law has been drafted in such a way that the date of elimination of these payments will take place when they are announced by the Canadian Cabinet. At present, the Cabinet has not eliminated facilitation payments.

A fourth major change is the elimination of “for profit” business entities being the only targets of the law. This may significantly widen the potential application of the CFPOA. Taken in conjunction with the nationality principle, it means the law could apply to Canadian non-governmental organizations, or NGOs, or Canadian employees of NGOs working abroad.

The fifth significant change in Canada’s CFPOA is the creation of a “books and records” offense, similar to the provisions of the US FCPA. The significant difference, however, is that the CFPOA offense is a criminal offense, which means the Canadian government has to prove the offense “beyond a reasonable doubt.” If it does, the penalty would be a penal consequence instead of the civil sanctions the FCPA imposes.

Although the Criminal Code of Canada already includes a books and records provision, it is not commonly used. Additionally, it is difficult to imagine a CFPOA case where the records would have properly and correctly been maintained in the context of a bribe.

The new version of the CFPOA also designates the Royal Canadian Mounted Police as the sole law enforcement agency that can investigate the related offences. While it had been conceivable that police at any level could have investigated the violations, to date all CFPOA cases in Canada were handled by the RCMP. Few, if any, other police agencies in Canada would have had the necessary resources to pursue such investigations.

The impact of Karigar

Although the Nazir Karigar case arose under the prior version of the CFPOA, the decision serves as an important guide.

The decision in R. v. Karigar 2013 ONSC 5199 clarified several principles that will be important in future CFPOA investigations and cases.

The Court found that the CFPOA requires no evidence of an actual bribe being paid and that a conspiracy or agreement to commit a bribe is a violation. The Court rejected the defense raised by Karigar that the Crown Prosecutor needed to prove receipt of the bribe by the foreign public official.

The Court noted that “…to require proof of the offer or receipt of a bribe and the identity of a particular recipient would require evidence from a foreign jurisdiction, possibly putting foreign nationals at risk and would make the legislation difficult if not impossible to enforce and possibly offend international comity.”

The Court also noted that within the context of the CFPOA the idea that employees of Air India, a government-owned and managed corporation, met the definition of foreign public officials. It is reasonable to expect that other Canadian Courts will accept this principle, given the permeation of Crown-run corporations in Canada.

The Karigar decision will have an important effect on Canadian prosecutions even under the new provisions of the CFPOA. To date, the 2013 year has been a significant one for anti-corruption legal developments in Canada.  The year promises more as current cases continue to find their way through the legal system and Mr. Karigar receives his sentence.

 

Note: The opinions expressed herein are those of the writer and not the Attorney General of Alberta nor the Attorney General of Canada.
 

*Steven Johnston serves on the Alberta Justice Specialized Prosecutions Economic Crime Unit where he prosecutes large-scale fraud and organized crime cases.  He previously worked for Manitoba Justice as a Crown Attorney in General Prosecutions before moving to the Specialized Prosecutions/Economic Crime Unit.

Steven is the National Co-Chair of the Osgoode Hall CPD Program on Technology Crime and Electronic Evidence.  He is a regular instructor at the Canadian Police College and the Ontario Police College in computer crime and electronic evidence and has instructed Crown and police officers in the areas of computer evidence, search and seizure, and fraud.   He has served as an expert on the Corruption of Foreign Public Officials Act for the University of Calgary, Transparency International, Canadian Institute, World Bank, and US Department of Justice, Federal Bureau of Investigations, and Securities and Exchange Commission.