Category Archives: Anti-Corruption & Bribery

ISO 37001: A System Review

The International Organization for Standardization (ISO) has recently entered the fray by establishing an ISO certification standard 37001 specifically addressing anti-bribery in corporations by providing a structure for organizations to assist them in the implementation or management of anti-bribery managements systems.  So what is ISO 37001?  Simply put, it is an international standard for anti-bribery management systems.  The beauty of ISO 37001 is the global acceptance of the standard for anti-corruption compliance.

Obviously an anti-bribery system is to prevent bribes from being given or offered by corporate individuals representing business interests of the organization.  As with all ISO certification standards there are specific elements that must be met by the organization in order to be certified.  The system is set up that there is a consistent review of the system in order to ensure compliance and continual improvement.

While national laws may differ regarding anti-corruption compliance, the idea, as with any standard, is to provide a common ground where all global branches of an organization, no matter the location, have the same basis for compliance.  Keep in mind that ISO 37001 only addresses bribery.  Other white collar compliance issues such as fraud, ant-trust offences and other types of corrupt practices activities are not within the scope of this standard.

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Corruption Prosecution Collapses After Wiretap Evidence Excluded

The high-profile corruption prosecution of two executives and the alleged intermediary to a foreign government has ended dramatically after a judge excluded the wiretap evidence collected by the RCMP. The defendants – Kevin Wallace & Ramesh Shah, both former Vice-Presidents at SNC-Lavalin, and Zulfiquar Bhuiyan, a dual Bangladeshi-Canadian citizen – were charged under the Corruption of Foreign Public Officials Act for bribes allegedly paid by SNC-Lavalin to secure a contract to supervise construction in Bangladesh.

The construction project was to build a multipurpose bridge connecting the southwestern region to the rest of Bangladesh. [1]  It was intended to stimulate economic growth by allowing transport of passengers, freight, natural gas, telecommunications and electricity.[2]  The project was forecast to cost approximately $2.9 billion and was funded, in part, by a $1.2 billion credit from the World Bank.

The Canadian investigation started after a World Bank investigator provided information obtained from four tipsters to the RCMP.  The tipsters alleged SNC-Lavalin was in the process of bribing Bangladeshi officials to secure the contract to supervise construction.  The RCMP never met any of the tipsters, but spoke with one by telephone.  The information provided by three of the four tipsters was obtained from other sources, but the RCMP never spoke with the tipsters’ other sources where identified.  The RCMP used information from the tipsters to obtain authorization to wiretap the private communications of the three defendants.  The information gathered on the wiretap led to the charges being laid.

Intending to challenge the wiretaps, the defence applied for a third party production order to compel senior investigators of the World Bank to appear before a Canadian court and produce documents.  The trial judge granted the applications.  The decision was appealed all the way to the Supreme Court of Canada.[3]   The Court overturned the trial judge’s decision.  The Court held that the World Bank did not waive its immunity by voluntarily providing information to Canadian law enforcement officials accordingly, its documents were immune from production.  Further, the Court found the documents requested were not relevant to the challenge of the wiretaps.

The defence subsequently brought a successful application to exclude the wiretap evidence.  Justice Nordheimer found that the two preconditions for a wiretap – (i) reasonable and probable grounds to believe an offence is or has been committed and (ii) investigative necessity – were not met and the wiretap should never have been granted.  On the first criterion, Justice Nordheimer noted that the RCMP relied almost entirely on information provided by the tipsters.  In his view, that information was not sufficient to provide reasonable and probable grounds because it was not compelling, credible or corroborated.  He was particularly critical of the reliability of the information.  He wrote:

The fact that a particular investigation may be difficult, does not lower the standard that must be met in order to obtain a [wiretap] authorization. Reduced to its essentials, the information provided in the ITO was nothing more than speculation, gossip, and rumour. Nothing that could fairly be referred to as direct factual evidence, to support the rumour and speculation, was provided or investigated. The information provided by the tipsters was hearsay (or worse) added to other hearsay.[4]

On the second criterion for a wiretap, Justice Nordheimer found that the RCMP failed to establish there were no other reasonable ways to investigate the allegations.

Justice Nordheimer concluded that the wiretap should not have been issued, and the evidence gathered by wiretap violated the defendants’ Charter rights to be free of unreasonable search.  Accordingly, he excluded all of the private communications intercepted from the evidence at trial. The Crown admitted that it had no reasonable prospect of conviction without the wiretap evidence.  The prosecutor decided not to call any evidence, and all three defendants were acquitted.

This was certainly not the end that Canadian prosecutors envisioned to a case the World Bank described as “a high-level corruption conspiracy among Bangladeshi government officials, SNC-Lavalin executives, and private individuals” that was proven by “credible evidence corroborated by a variety of sources.”[5]  The collapse of the Canadian case was caused, in large part, by deficiencies in the RCMP’s preliminary investigation.  Investigators appear to have taken insufficient steps to vet tipster information before seeking authorization for wiretaps.  This failure rendered the wiretap evidence inadmissible.  This case underscores the importance of the preliminary stages of the investigation and highlights opportunities for defence counsel seeking to exclude evidence obtained by wiretaps authorized primarily on the basis of tipster information.

[1] World Bank “Bangladesh Padma Multipurpose Bridge Project”, online: http://projects.worldbank.org/P111017/bangladesh-padma-multipurpose-bridge-project?lang=en

[2] Ibid.

[3] World Bank Group v. Wallace, 2016 SCC 15

[4] R. v. Wallace. 2017 ONSC 132 at para 71

[5] World Bank, “World Bank Statement on Padman Bridge” (29 June 2012) online: http://www.worldbank.org/en/news/press-release/2012/06/29/world-bank-statement-padma-bridge

President Trump and Congress Water Down Anti-Corruption Rules for U.S. Mining Companies

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On February 14, 2017, President Trump signed into law a joint resolution of Congress to repeal a critical anti-corruption rule for oil, gas and mining companies. The law was introduced by the House on January 30, 2017. It quickly moved to the Senate, where it was passed with the support of the Republicans and opposition of the Democrats.

The rule is referred to as the “Cardin-Lugar regulations” and was enacted by the U.S. Securities and Exchange Commission, in accordance with the Cardin-Lugar amendment of 2010.  The amendment, prompted by the 2008 financial crisis and high prevalence of corruption in developing countries, directed the Securities and Exchange Commission to issue a rule requiring oil, gas and mining companies listed on the U.S. stock exchange to disclose how much they paid to hosting foreign governments (above a certain threshold).  The purpose of this amendment was to curb bribery and otherwise illicit payments made to governments in return for specific natural resource extraction projects.

The rule itself took a decade to finalize, and, up until the U.S. government’s recent decision to overturn it, was set to take effect next year. As the rule stood, it would require U.S. listed mining companies to file an annual report with the Securities and Exchange Commission, outlining the type and total amount of payments made to foreign governments (and the U.S. federal government) with respect to extractive projects. With the decision to repeal the Commission’s rule, there is therefore no indication that U.S.-listed companies will be subject to a reporting regime in the near future. That is, until the Securities and Exchange Commission creates a new rule. While the Cardin-Lugar regulations have been overturned, the Cardin-Lugar amendment has not been. This means that U.S.-listed companies will likely still be subject to reporting requirements at some point in time, as the Cardin-Lugar amendment requires the Securities and Exchange Commission to issue disclosure rules on extractive companies. However when this rule will be enacted, is yet to be determined. Given the length of time associated with enacting the original rule, it is unlikely that a new reporting regime will be established any time soon. In the meantime, U.S.-listed companies will be required to continue to track their payments, pursuant to the U.S. Foreign Corrupt Practices Act , however, they will not be required to make this information public.

It is unlikely that other countries who have adopted legislation consistent with the Cardin-Lugar regulations will follow the U.S. government’s new direction in this field. The regulations have received widespread support from the world’s major extractive companies, and many companies have a reporting regime. It has led to the creation of a global standard of transparency in the extractive industry, with numerous countries including Canada, the UK and the EU, enacting similar legislation to help combat corruption and to increase accountability in corporate governance.

Canada continues to be one of the countries supporting transparency requirements in the extractive industry. The Extractive Sector Transparency Measures Act  for example came into force in June 2015 and contains broad reporting obligations for oil, gas and mining companies. The reporting obligations go even further than the Cardin-Lugar provision, to include not only entities included on Canadian stock exchanges, but also certain private companies.

A concern for Canadian and foreign companies who will maintain their reporting regimes is whether the repeal of the Cardin-Lugar regulations will place U.S.-listed companies operating in mining extraction areas at an advantage compared to companies subject to rigorous transparency requirements. Particularly for projects in developing countries such as Africa, where there is a problem with corruption and where succumbing to bribery could lead to the award of mining rights and subsequent contracts. While the Cardin-Lugar rule would not have ended corruption, it was expected to put pressure on those giving bribes and those receiving them, as they would be aware that they would have to report any payments made to government. With the repeal, there is the possibility that U.S.-listed companies could feel more inclined to engage with corrupt governments and be under less pressure to decline a bribe, which could put them ahead of competitors from Canada, the UK, the EU and elsewhere. Whether or not this will in fact cause such a shift in the thinking and conduct of U.S.-listed companies during their dealings with foreign governments is of course undetermined. However, there remains a concern for mining companies subject to these types of reporting regulations, when operating and competing against American companies in these areas.

Mining companies listed on both U.S. and foreign exchanges will still be subject to transparency requirements. While the U.S. may not have reporting requirements, U.S.-listed companies operating in Canada, UK and EU will still be required to comply with applicable transparency legislation. Therefore, if a company has reason to believe and is concerned that an American competitor is committing bribery or corruption, it should consider further investigation. The suspect company may be subject to other transparency requirements and anti-corruption legislation.

In conclusion, although the repeal of the Cardin-Lugar regulations signals that Canadian, UK and EU companies will have tougher reporting guidelines compared to their US neighbours, the playing field may have just become more complex, rather than uneven.

Upcoming Event: Is Canada taking White Collar Crime Seriously?

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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.

When:
Wednesday, March 22, 2017
7:45am Breakfast
8:15am Presentation
9:00am Q&A

Where:
Fasken Martineau, 333 Bay Street, 24th Floor, Bay Adelaide

>> Register Now – Space is limited <<

Guest Post: Insights into the New French Anti-Bribery & Corruption Law

This week, White Collar Post features a guest post from Frédéric Ruppert(1) and Maria Lancri(2).

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In December 2016, France passed into law the so called “Sapin 2” law to combat non-ethical behavior and promote transparency. Its new anti-corruption legislation is intended to improve its commitment to business ethics, the prevention of fraud and prohibiting the bribery of foreign public official. This new French law sets forth anti-corruption measures with a view to the more efficient pursuit and prosecution of corruption cases, both foreign and domestic. The impetus came from the frequent critics, most notably from the Organization for Economic Cooperation and Development, that France had not been adequately enforcing its current anti-corruption  laws.

Large companies now have mandatory anticorruption programs, pursuant to the new law, Companies or groups of companies over 500 employees and EUR100 million of turnover and public administrations must implement a detailed anti-corruption compliance program.

Some features of the new law include obligation to implement an anti-corruption compliance program  and that the executive managers bear the actual responsibility of enforcing this obligation within their companies. This is in line with a current trend where the underlying rationale is that only when individuals understand that their personal liability is at stake, will they take care of the situation.

Anticorruption programs are quite common in various organizations now, in particular following the footsteps of US, UK and many Canadian companies. The enforcement of the parent companies’ local laws (most notably US based) against their French subsidiaries, has really helped the understanding and acceptance of such regulations. French subsidiaries of foreign companies have implemented these programs for years now.

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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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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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Anti-Bribery & Corruption Enforcement Protects Immunity of Whistleblowers

The international landscape on the law with respect to whistleblowing is changing dramatically and quickly. The Supreme Court of Canada is the first national high court in the world to recognize and protect the role of whistleblowers, their identity, and immunity, from disclosure and criminal prosecution.  In its decision involving the World Bank Group,  it addressed the subject of whistleblower immunity in an international case.

The opening paragraph of the Supreme Court Judgment, delivered by Justices Moldaver and Cote, reads as follows:

“Corruption is a significant obstacle to international development.  It undermines confidence in public institutions, diverts funds from those who are in great need of financial support, and violates business integrity. Corruption often transcends borders.  In order to tackle this global problem, worldwide cooperation is needed.  When international financial organizations, such as the appellant World Bank Group, share information gathered from informants across the world with the law enforcement agencies of member states, they help achieve what neither could do on their own”.[1]

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Guest Post: Panama Papers and the emergence of anti-corruption compliance

This week, White Collar Post features a guest post from internationally known compliance and anti-corruption expert Marc Y. Tassé.

While the leaks continue from the “Panama Papers”, continuing to make headlines around the world, and as the related scandals intensify, there have been numerous articles written on the whole topic. My following comments and remarks take under consideration and outline some of those and my own comments.

The International Consortium of Investigative Journalists obtained millions of documents showing heads of state, criminals and celebrities using secret hideaways in tax havens.

  • Files reveal the offshore holdings of 140 politicians and public officials from around the world
  • Current and former world leaders in the data include the prime minister of Iceland, the president of Ukraine, and the king of Saudi Arabia
  • More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories
  • Major banks have driven the creation of hard-to-trace companies in offshore havens

Offshore banking is not in itself illegal, and those named in the “Panama Papers” should not automatically be presumed to have done anything wrong, but history has shown that secrecy attracts those with something to hide. The offshore banking system is being abused for illicit purposes such as tax evasion and money laundering resulting from corruption.

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What happens in Vegas…SEC investigates Sands Hotel and Casino

In 2006 through to at least 2011, the Las Vegas Sands hotel and casino corporation transferred funds totaling more than $62 million to a “consultant” in China to promote their interests.

Lacking supporting documentation for appropriate authorization and identity, the money trail raised a red flag for the Department of Justice (DOJ) in the United States. This led to an investigation under the authority of Foreign Corrupt Practices Act (FCPA), as well as an investigation carried out by the U.S. Securities and Exchange Commission (SEC), since the Sands is traded on the New York Stock Exchange.

Since the Sands management could not account for the funds transferred to the consultant, bribery was inferred. This lack of controls extended to other transactions, including gifts and entertainment to foreign officials, employee and vendor expense reimbursement, and customer complimentary services.

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