On April 20, 2017, the Government of Canada introduced a new tool in the fight against federal fraud. The federal contracting fraud tip line is a joint initiative between the Competition Bureau, Public Services and Procurement Canada (PSPC) and the Royal Canadian Mounted Police (RCMP). It allows anyone who suspects unethical business practices in federal contracting, such as bid-rigging, price-fixing, bribery, undisclosed conflict of interest and fraudulent contract schemes, to report it anonymously. Individuals may report either by calling in to a toll-free number or by completing an online form. The information provided through the tip line will be shared with three federal organizations and will be used to help conduct investigations and to introduce due diligence measures, where warranted. Any suspected criminal activity that is uncovered as a result will be turned over to the Competition Bureau and/or the RCMP.
The tip line complements measures already in place at the Competition Bureau to detect fraud in the realm of federal contracting. The immunity and leniency programs are currently the most relied upon by the Competition Bureau to detect and investigate criminal offences under the Competition Act. Under these programs, individuals with evidence of criminal offenses under the Competition Act are given immunity or lenient treatment if they cooperate with the Competition Bureau and Crown in investigating and prosecuting others implicated in the illegal activity. However, the Competition Bureau has still encountered challenges over the years in securing convictions with the evidence obtained through these programs. The primary reason being insufficient resources and the lack of experience and training of Competition Bureau investigators.
This was evident in the 2014-2015 trial of several information technology companies and individuals charged with conspiracy and working together to obtain contracts with the federal government. The trial arose from charges laid following an investigation at the Competition Bureau and ultimately led to a defeat for the Competition Bureau, due to the weaknesses in the Crown’s case. At trial, it was shown that the Competition Bureau had relied almost exclusively on the testimony of self-interested people who were competing against the accused when making its referral of the case to the Director of Public Prosecutions. The Competition Bureau investigators had essentially taken the immunity and leniency reports of these individuals without independent investigation. The evidence at trial disclosed that the Bureau investigators in charge of the case, while seizing hundreds of thousands of documents from the suspect companies, failed to seek any significant material from the government agencies involved. The resulting, 8-month jury trial resulted in 60 not-guilty verdicts.
It will be interesting to see if the Competition Bureau, with its new Tip Line has learned from such cases and how it investigates future potential criminal offences under the Competition Act. By collaborating with RCMP officials, this hopefully marks the beginning of additional measures being implemented by the Competition Bureau to ensure that allegations of illegal conduct are investigated thoroughly and that only appropriate action is taken. It is not clear whether the Competition Bureau, PSPC or the RCMP will take the lead in investigations arising from tip line complaints. The addition of a combined task force, signals that the Competition Bureau is getting serious in its efforts to detect and investigate Anti-corruption crimes.
 “Government of Canada launches tip line to help Canadians report federal contracting fraud”
 “Report wrongdoing in government contracts and real property agreements”
The Quebec Superior Court recently released a decision with broad implications for corporate employers, owners, managers and supervisors across Canada. In R. c. Fournier, 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.
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.
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.
Norm Keith, LL.M., partner at Fasken Martineau, will address this timely and important topic of the accountability, criminal enforcement and the social responsibility of corporations in Canada. Topics to be covered will include:
1. The “new normal” of criminalizing corporate behavior;
2. How the Westray Mine disaster changed corporate criminal liability;
3. The problem of proof in white collar prosecutions (Dunn & Duffy);
4. Recent examples of white collar convictions (Karigar & Kazenelson);
5. Will criminal prosecutions make businesses “more ethical”;
6. Towards a rationale model of corporate accountability and compliance.
Wednesday, March 22, 2017
Fasken Martineau, 333 Bay Street, 24th Floor, Bay Adelaide
>> Register Now – Space is limited <<
In R v Anthony-Cook, the Supreme Court in a unanimous judgement authored by Moldaver J. has settled the test to be applied where a judge is faced with a joint submission he or she has difficulty accepting. This case has important implications for accused and their counsel in negotiating a Plea bargain with the Crown in criminal and quasi-criminal, regulatory prosecutions.
Joint submissions are the culmination of the plea bargaining process in criminal cases. They are the result of discussions and negotiations, often with the assistance of a judge conducting pre-trial conference. The Crown inevitably focuses on the seriousness of the allegations and the harm to the alleged victims. The defence will focus on numerous considerations including mitigating factors, circumstances of the accused, evidentiary problems with the Crown’s case and remedial steps taken by the accused. Sometimes the negotiations involve consideration of what’s often referred to as a “rehabilitative remand” where the accused is given time to undergo a restorative justice program, make restitution, or initiate procedures to prevent the harm caused from reoccurring.
Introduction: 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 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 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:
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.
This post was originally published on Timely Disclosure (a Fasken Martineau blog) and authored by Tracy L. Hooey.
Securities regulatory authorities in Ontario and nine other provinces and territories of Canada published CSA Multilateral Staff Notice 58-308 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices on September 28, 2016. The staff notice summarizes a review of the gender diversity and term limit disclosure of 677 non-venture issuers (being those listed on the Toronto Stock Exchange with year-ends between December 31, 2015 and March 31, 2016). As a result, these statistics do not include data regarding most banks.
Key findings of the gender diversity disclosure review include:
- there are more women on boards than last year. Of the 215 issuers with over $1 billion market capitalization, 18% of board seats are held by women (up from 10% last year);
- only 21% of issuers adopted a policy relating to the identification and nomination of women directors (up from 15% last year) and issuers with such a policy had higher average female board representation (18%) as compared to those with no policy (10%);
- only 9% of issuers set a target for the representation of women on boards (up from 7% last year) and those issuers with targets had a greater number of women on their boards (25%) than those without a target (10%);
- 66% of issuers disclosed that they consider the representation of women on their boards as part of their director identification and nominating process (up from 60% last year);
- board and executive officer representation by women varied significantly by industry.
Key findings of the board renewal disclosure review include:
- 20% of issuers adopted director term limits (up from 19% last year);
- of those issuers with term limits, 48% set age limits, 23% had tenure limits and 29% had both;
- the most common reason cited for not adopting board renewal mechanisms was that term limits reduce continuity or experience on the board.
This release follows Ontario Securities Commission Chair and CEO Maureen Jensen’s call for leadership on women on boards. Chair Jensen highlighted the low number of women filling board vacancies. She noted that “of the 521 board seats vacated during the year, just 15% were filled by women” and “without an improvement in the vacancy fill rate, we will never reach 30% female board representation”.
Proposed Amendments to CBCA
In addition, the Government of Canada released proposed amendments to the Canada Business Corporations Act which, among other things, would require that distributing CBCA corporations identify the gender composition of their boards and senior management and disclose their diversity policies or explain why none are in place.
The Ontario Securities Commission (OSC) has launched the Office of the Whistleblower and published OSC Policy 15-601 Whistleblower Program effective July 15, 2016. Together, these initiatives establish a new whistleblowing program that offers financial awards of up to $5 million for tips on possible violations of Ontario securities law that lead to enforcement action.
The OSC program allows whistleblowers to make anonymous reports to the OSC, and new protections have been enacted for whistleblowers that access the program. In particular, the Securities Act has been amended to add anti-reprisal provisions protecting employees who have sought advice about, expressed an intention to or actually provided information about a possible securities violation to the OSC. In addition, the Act invalidates gag or confidentiality provisions or agreements that would otherwise silence or prevent whistleblowers from participating in an investigation.
On April 1, 2016, the Competition Bureau and the Public Prosecution Service of Canada (PPSC), formerly the Federal Department of Justice, secured their ninth guilty plea in the Bureau’s years-long investigation of the Japanese auto parts industry. .The Showa Corporation—a Japanese manufacturer and supplier of auto parts—pleaded guilty in Court to one count of bid-rigging under section 47 of the Competition Act. The Showa Corporation was sentenced to pay a fine of $13 million—the second largest fine ever ordered by a Canadian court for a bid-rigging offence.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the federal agency responsible for the detection, prevention and deterrence of money laundering and terrorist financing, has, for the first time, imposed an administrative monetary penalty on a Canadian bank. The penalty of more than $1.1-million comes at a time of increased scrutiny of Canadian financial institutions and financial transactional crime as a result of the publication of the Panama Papers.
The enforcement efforts of the Ontario Securities Commission (OSC), the regulator that administers and enforces compliance with the provisions of the Securities Act (Ontario) and the Commodity Futures Act (Ontario), have had mixed success— at best. With a mandate to protect investors and ensure fair and efficient capital markets through monitoring compliance and enforcement measures in the securities industry in Ontario, the regulatory body has been struggling to be taken seriously. Having taken a chapter from the playbook of the American national Securities Exchange Commission (SEC), prosecuting individuals for Insider trading, tipping, and securities fraud, the initial results, which are highlighted below, were underwhelming. Now, in a renewed effort to assert its presence in the capital markets as a regulator with teeth, the OSC is taking new approaches, with more promising results.