Author: Norm Keith

Norm Keith

About Norm Keith

Mr. Keith is a senior partner and member of the White Collar Defence practice group in the Toronto office of Fasken Martineau and the author of 12 books, including Insider Trading in Canada (Lexis Nexis, 2012). Contact him at +1 416 868 7824 or nkeith@fasken.com.

Workplace Manslaughter Charge Going To Trial Says Quebec Superior Court

 

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The Quebec Superior Court recently released a decision with broad implications for corporate employers, owners, managers and supervisors across Canada.  In R. c. Fournier,[1] Justice Villemure held that an individual’s  contravention of provincial health and safety legislation was an “unlawful act”, under section s. 222(5)(a) of the Criminal Code (“Code”) and therefore a basis for committal to trial under a criminal charge of manslaughter.  This case involved the owner of a small construction company, who is now personally being charged with manslaughter arising from a workplace fatality. This is the first decision of its kind in Canada.

The decision must not only have been a shock for Mr. Fournier, the owner of a small construction firm, who had lost a worker in a tragic workplace accident, but also for criminal lawyers across Canada, since this is the first time this issue has been considered by the courts.  It  will be even more shocking for individuals, supervisors and employers, and others, bound to comply with provincial, strict liability health and safety laws.  Since there were 852 workplace fatalities in Canada in 2015 – there were 852 potential opportunities for a contravention of health and safety laws to give rise to criminal manslaughter charges.[2]

What Happened in this Case

According to the Superior Court’s decision the facts of the case include the following:

  • Lévesque and Mr. Fournier were working together at a construction project replacing in-ground sewer and water main lines;
  • The Quebec Safety Code was applicable to the excavation that was taking place;
  • Fournier and Mr. Lévesque were both working in an excavation on the day of the fatality;
  • The walls of the excavation were not shored, and dirt and other material removed from excavation was placed too close to the edge of the excavation;
  • Lévesque died when the walls of the excavation collapsed. He was working alone at the time of the collapse.[3]

Mr. Fournier was charged with two counts under the Code — criminal negligence for breach of the duty of persons directing work under section 217.1 thereby violating s. 220 of the Code, and manslaughter by unlawful act under section 222(5)(a) of the Code. There is no mention in the Superior Court decision about whether strict liability offences under the Quebec Safety Code were also laid against Mr. Fournier and what the outcome, if any of those charges were.

Following a preliminary inquiry, a judge committed Mr. Fournier to stand trial on both charges.  Mr. Fournier challenged the committal to stand trial on the manslaughter charge.

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Corruption in the Aviation Industry? “Please Say it Isn’t So!”

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The international aviation industry is highly competitive, international, and yes, known for allegations of corruption. Whether buying, selling, maintaining, servicing or supplying an aircraft, an airport, or the supply chain or related needs, corruption risks associated with the aviation industry is well documented. Companies and individuals involved in the industry face pressures and temptations to flout the law to gain business advantage. However, the legal and business consequences of airline corruption includes, but is not limited to, criminal investigations, prosecutions, convictions, penalties, reputations being destroyed, disgorgement of profits, shareholder losses from the drop of share price, careers ruined, civil law suits launched by investors, loss of confidence by the investment community, legal fees, fines, and jail terms for individuals involved.  Several examples illustrate the serious risks and consequences of corruption in the global aviation industry.

In June 2012, Brazil-based Embraer S.A., the world’s third largest commercial aircraft manufacturer, indicated in its Form 6-K (Report of Foreign Private Issuer) filed with the United States Securities and Exchange Commission (“SEC”), that the company had received a subpoena from the SEC inquiring into certain operations concerning sales of aircraft. In response to this SEC-issued subpoena and associated inquiries into the possibility of non-compliance with the U. S. Foreign Corrupt Practices Act (“FCPA”), Embraer retained outside legal counsel to conduct an internal investigation on transactions carried out in three specific countries.

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Corporate Compliance to Prevent Criminal Liability in Canada

tie-690084Introduction: The Bill C-45 Initiative

Effective corporate compliance to prevent regulatory risk requires a foundation of legal understanding. While corporate accountability and criminal liability has been a recent focus of legislation, law enforcement and regulatory agencies, the modern legislative framework for holding corporations criminally responsible for the wrongdoing[1] was enacted over a decade ago with the passing of Bill C-45 – An Act to Amend the Criminal Code (Criminal Liability of Organizations).

These amendments to the Criminal Code (“Code”) expanded the range of individuals whose acts and omissions could result in corporate criminal liability from those who were “directing minds” to the current standard descried in the Code as “senior officers”. Somewhat surprisingly, there have been few cases interpreting the new Code provisions and considering the scope of individuals that may be “senior officers” for the purposes of the Code. The limited jurisprudence does affirm the increased risk of criminal liability for corporations arising from the Bill C-45 amendments. Decisions from the Courts of Appeal for Ontario and Quebec[2] indicate that courts will interpret the term “senior officer” broadly, encompassing certain lower level managers as well as those employees who manage an important aspect of the corporation’s business.

Replacement of “Directing Mind” with Statutory Formula

The historical and political impetus for Bill C-45 was the 1992 Westray mine disaster, where 26 miners were killed in Pictou County, Nova Scotia. No individuals or corporate employer was ever convicted of a criminal or occupational health and safety regulatory offence. In response to a public inquiry, failed legal proceedings and union lobbying, Bill C-45 was passed to amend the Code to facilitate the conviction of organizations for criminal offences.

Under the former identification theory, a corporation faced criminal liability for the criminal acts of a “directing mind” of the corporation. At common law, the directing mind was defined as a person with:[3]

authority to design and supervise the implementation of corporate policy rather than simply to carry out such policy. In other words, the courts must consider who has been left with the decision making power in a relevant sphere of corporate activity.

The amendments were designed to remedy the inherent limitations of the attached to the “directing mind” paradigm and to better align the Code with the reality of modern, large corporations. As a result, Bill C-45 introduced the defined term “senior officer”. Under the Code, “senior officer” is:

  • a representative who plays an important role in the establishment of an organization’s policies; or
  • is responsible for managing an important aspect of the organization’s activities; and,
  • in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer.

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New French Anti-Corruption Law Provides for DPAs

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On Tuesday, November 8, 2016 France passed its new anti-corruption legislation, to improve its commitment to business ethics, the prevention of fraud and prohibiting the bribery of foreign public official.  The new anti-corruption law, which has taken over a year to revise and implement, is intended to reach the same standards and levels of enforcement as the United Kingdom’s Bribery Act (“BA”) and the American Foreign Corrupt Practices Act (“FCPA”). The most interesting aspect of the new law is that it permits corporate defendants to enter into negotiated resolutions, in a form that is commonly known as Deferred Prosecution Agreements (“DPAs”).

France has long been criticized for its weak anti-corruption law and enforcement activities.  The Organization for Economic Cooperation and Development (“OECD”) working group on bribery said recently that about 24 new corruption cases were opened in the past two years by French authorities yet no French corporation had been convicted of any foreign bribery offence.  In 2014, however, the United States Department of Justice (“DOJ”) secured three of the ten biggest Foreign Corrupt Practices Act (“FCPA”) enforcement actions against French companies by means of DPAs.  French corporate giants Alston paid $772 million, Total SA, paid $398 million and Technip SA, paid $338 million.  France is the only country whose corporations have appeared on the DOJ’s FCPA top ten list, three times.

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U.S. Appeals Court Upholds 180 Month Prison Term for Tax Fraud

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In a case that demonstrates the remarkable contrast between the American and Canadian enforcement of tax rules, the United States Court of Appeals, for the Second Circuit, recently upheld a conviction in a sentence of 180 months imprisonment for seven counts of tax fraud and evasion. The severity of the penalty assessed against Paul M. Daugerdas (“Daugerdas”), can only be matched by the huebris of the defendant himself. The case is a cautionary tale for Canadian tax planners in an age of growing tax evasion and fraud enforcement.

Daugerdas was a certified public accountant and tax attorney, first at Arthur Anderson, then at two law firms. Throughout his career, Daugerdas developed, sold, and implemented a variety of tax reduction strategies for wealthy clients. His specialty was the so-called “short sale shelter, short option shelter, swaps shelter, and the HOMER shelter”.[1] Deugerdas’ tax planning and shelters covered a period from 1994 through to 2004.  In August of 2000, the Internal Revenue Service announced that transactions like those being offered by Dougerdas no longer provide the favourable tax treatment that he offered to his clients.  In response, Deugerdas and his colleagues developed similar transactions with different elements and strategies.

Deugerdas’ huebris was exposed in the appeal decisions when the evidence reveled that part of his tax planning strategy involved intentional back-dating documents to attempt to gain tax advantages for his clients.  Also, had his law firms issue “more-likely-than-not” opinion letters falsely stating that the tax shelters had a reasonable possibility of producing a profit, but it was clear that they would not. The letters were held to be entirely dishonest.

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