Anti-bribery and Anti-corruption enforcement activity is getting a lot of exposure thanks to the Niko Resources case, here. The case might be over-exposed, but that is because it is the only case involving the CFPOA in Canada’s recent history. The fact it is the subject of many legal seminars suggests that new CFPOA enforcement actions will become public in the near future.
I just returned from a Heenan Blaikie presentation, here, on this subject. The Heenan panel was well balanced and covered the important areas of legal, enforcement, and, most importantly, loss control from an internal and third party perspective.
Corporal Lloyd Schoepp of the Commercial Crime Section, International Anti-Corruption Unit, RCMP, was uncomfortably quick with examples of “typical” CFPOA corruption examples, investigation support, evidence gathering tools and international enforcement partners. The problem is that there really is no such thing as “typical” regarding public CFPOA actions, and most of the scenarios provided sounded nothing like Niko or Hydro-Kleen (the only two public CFPOA corporate enforcement actions.) Corporal Schoepp was also very quick to remind the audience (a full house of inside and outside counsel), that bribery investigation is an extremely sensitive topic, based on its potential impact on a company’s share price, and most affected individuals may have no idea they are under investigation.
There are only two assumptions I can make from this observation; one, Corporal Scheopp has a wonderfully vivid imagination, or two, Corporal Scheopp has many different front-of-mind cases, involving Canadian publicly traded companies, that allow quick recall of real life corruption examples, investigation supporters, evidence gathering tools and international enforcement partners. My inherit skepticism is pushing me to the latter.
Paul Lalonde provided the legalese to show how broad certain CFPOA terms will be defined as precedent law develops the Act; including, “public official” and its reach to every level of government from national to local, including international organizations (e.g. UN), as well as natural persons and corporations, and family, political and charities associated with such public official; “direct and indirect” bribes, which makes every employee or their party agent a risk to the corporation; “jurisdiction” wholly or partially connected to Canada, and a real and substantial “link” between the offence and Canada.
Bronwyn Best, Executive Director and Secretary of Transparency International Canada Inc., here, and President of Heiwa Business International, provided valuable risk management tools that can be utilized by businesses of all sizes and leaders of all levels from division middle management to parent company senior executives. In fact, based on the facts presented by the panel, my use of the term “can be utilized” is misleading and should be replaced with “must be immediately and aggressively implemented”. These tools are for Risk Identification, Risk Evaluation, Loss Control and Governance / Compliance / Reporting. They are not macro level ideas or general guiding principles, typical of Canadian service providers. These tools are designed for implementation and provide realistic and reasonable action items. They can be found at www.transparency.ca
David Riker, Managing Director Compliance and Third Party Screening Solutions for Kroll, was there to say that if you don’t enjoy the benefit of time to create in-house risk management, and if you can afford it, third party help might be your best solution. It actually might be your only choice, because corporate and individual executive liability might demand that a company-wide full service anti-corruption / anti-bribery command and control center be established within months in order to avoid catastrophic damage. Though these may be my words, not David’s, I am not trying to fear-monger. David provided examples where international companies were on the cusp of losing their biggest customer contracts and were the subject of massive regulator fines and follow-on civil liability risk if they could not immediately demonstrate an industry leading compliance and governance regime.
Finally, Paul closed the seminar with a sobering reminder of the complexities of international business law, the importance of knowing your legal professional responsibilities and required conduct, the realities of current perceptions of in-house and outside counsel, and the potential pitfalls related to lawyer/client privilege.
Additional comments or observations during the seminar included the following (they might be my personal thoughts or comments offered by the panelists, but they should not be imputed to me or any specific individual):
• There are no Deferred Prosecution Agreements (DPAs are common under FCPA) available under CFPOA, so don’t rely on US or UK in-house or outside counsel when it comes to opportunities and obligations under the CFPOA. Leniency agreements or some other creative sentencing agreement might be available from the Minister of Justice, but make sure you have counsel experienced with these exact matters;
• The US Department of Justice may have lost recently in the courts on FCPA cases where entrapment was alleged, but there is no precedent in Canada, and the RCMP does have ability to wire-tap and they are not afraid to use it. However, with only 14 people in the RCMP anti-corruption team across Canada, they probably don’t have a lot of time to pose as Foreign Public Officials. From the sounds of it, they don’t need to, they get a ton of information from competitors, Department of Foreign Affairs, NGOs, Trade Journals, and, of course, Google;
• Accountants and auditing procedures are not making it easy for investigators to find and evaluate “facilitation payments” or “gifts and entertainment” expenses, but don’t think that will reduce risk, it will just make them work harder to find them, and increase the minimum settlement, investigation and defence costs, not to mention increase the likelihood of a future stakeholder allegation of misrepresentation;
• Don’t focus only on CFPOA, the authorities could decide to proceed under the Proceeds of Crime Act (longer prison terms and unlimited fines), and you also need to prepare for a follow-on Securities Class Action Claim, a Derivative Action, a pension beneficiaries claim, an Employment Practices Retaliation lawsuit, an Anti-Money Laundering action, an SRO / Regulatory proceeding, statutory liability obligation following bankruptcy, and/or civil liability from a creditor or asset/entity purchase alleging material non-disclosure.
One of my next blog posts will attempt to address insurance obligations / opportunities as they relate to CFPOA.
Greg Shields is a D&O, Professional Liability and Crime insurance specialist and a Partner at the University and Dundas (Toronto) branch of Mitchell Sandham Insurance Services. He can be reached at gshields@mitchellsandham.com, 416 862-5626, or Skype at risk.first. And more details of risk and loss control can be found on the Mitchell Sandham blog at http://mitchellsandham.com/
CAUTION: This article does not constitute a legal opinion or insurance advice and must not be construed as such. It is important to always consult a registered and truly independent insurance broker and a lawyer who is a member of the Bar or Law Society of the relevant jurisdiction with regard to this material before making any insurance or legal decisions. All material is copyrighted by Mitchell Sandham Inc. and may not be reproduced in any form for commercial purposes without the express written consent of Mitchell Sandham Inc. Anyone seeking to link this document from any external website must receive the consent of Mitchell Sandham Inc. by sending an e-mail to gshields@mitchellsandham.com.