Category Archives: Sentencing & Deferred Prosecution Agreements

Analysis, Canada, Sentencing & Deferred Prosecution Agreements

Features of Canada’s New DPA Scheme

The Canadian Government has announced that it will be moving forward, albeit slowly, with a Deferred Prosecution Agreement (DPA) system. The recent announcement from the Government of Canada came on March 27, 2018, in a “Backgrounder” under the heading “Remediation Agreements and orders to Address Corporate Crime.”

Canadian DPAs will be known as the Remediation Agreement Regime (“RAR”). The federal government’s long awaited move towards DPA’s have several specific but not unique features. First,  a RAR would be a voluntary agreement between a prosecutor and an organization accused of committing a criminal offence. A corporation cannot be force into. RARs would set out an end date and would need to be presented to a judge for review and approval.

Second, before approving the remediation agreement, the judge would need to be satisfied of the following:

  1. The agreement is in the public interest; and
  2. The terms of the agreement are fair, reasonable and proportionate.

Third, when these criteria are met, the judge would issue a judicial order approving the RAR. While an agreement is in force, any criminal prosecution for conduct that is covered by the agreement would be suspended. If the accused organization complied with terms and conditions set out in the RAR, the prosecutor would apply to a judge for an order of successful completion when the agreement expires.

The legislation is proposed to have the following terms and conditions: the corporation has accepted responsibility for, and stop, their alleged wrongdoing; it has agreed to pay a financial penalty; it has been disgorged of any benefit gained from the wrongdoing; it has enhanced its  compliance measures; and has made restitution to any victims, including overseas victims, as deemed appropriate in the circumstances.

Fourth, the criminal charges would then be stayed in Court at the request of the prosecutor, and no criminal trial or conviction would follow. The stated purposes of the RAR include the following:

“a. To denounce an organization’s wrongdoing and the harms that such wrongdoing has caused to victims or to the community;

b. To hold the organization accountable for the wrongdoing;

c. To require the organization to put measures in place to correct the problem and prevent similar problems in the future;

d. To reduce harm that a criminal conviction of an organization could have for employees, shareholders and other third parties who did not take part in the offence; and

e. To help repair harm done to victims or to the community, including through reparations and restitution.”

Fifth, however, if the accused did not comply with all of the RAR, the criminal charges would be revived and the accused could be prosecuted and potentially convicted. In other words, all bets are off and the corporation will be prosecuted to the fullest extent of the law.

Sixth and finally, the RAR program will come into effect 90 days after the Budge Implementation Act, is passed into law and given Royal Assent (yes, the Queen’s representative still have to approval all Government of Canada’s new laws. Strangely, the RAR legislation is already being considered by Parliament as part of the Budget approval process, internally and without public hearings.

Analysis, Europe, Sentencing & Deferred Prosecution Agreements

The French system of law is changing through DPAs.

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

One year after the enactment of the Sapin II Law, that set up the French Anticorruption Agency “AFA” and authorized Deferred Prosecution Agreements “DPA” à la française, the first DPA was approved by the Paris Tribunal.

Although the investigation started years before the Sapin II Law enactment and the matter involved money–laundering of tax evasion proceeds rather than corruption, this French DPA is being watched with attention as a guidance for future settlements.

It was brought together by i) the French National Financial Prosecutor “NFP,” who contributed to the Sapin II law and the DPA, with a clear understanding that business requires a dedicated and efficient tool against white–collar crimes, and ii) the negotiations with the defendant’s lawyers, after the Sapin II Law enactment.

The DPA statement of facts state that HSBC group and particularly its Swiss affiliate HSBC Private Bank (Suisse) SA “PBRS,” sent its salespeople to France to prospect new French clients or offer new products to existing clients. Most, also French tax residents, did not declare their Swiss accounts, contrary to French legal requirements. PBRS thus assisted them in illegally concealing these assets from the French tax administration. A judicial investigation was then opened; PBRS was indicted for unlawful financial and banking solicitation and aggravated money–laundering of tax evasion proceeds.

As PBRS admitted to the facts and accepted their legal characterization, which was necessary because an investigation was opened, the NFP proposed a DPA that the Tribunal approved.

Because the Justice Ministry has not yet issued any guidelines, the HSBC/PBRS DPA is valuable in understanding how authorities determined the fine paid by PBRS. It describes i) PBRS’ activity in France, ii) the number of its employees, iii) the value of the undeclared assets managed for its French clients, iv) its profits, and v) its profits derived from assets managed for French clients. From this, the authorities calculated a €86,400,000 fine for disgorgement of profits.

The compliance program of HSBC group at the time, is described by the DPA as less developed than today. It also notes that its subsidiaries, including PBRS, were allowed to conduct their business quite independently. HSBC group has since overhauled its compliance program, increased its control over its subsidiaries, withdrawn from certain markets and implemented strict financial crime, regulatory and compliance standards. At PBRS’ level, most managers were replaced, a transparency policy was implemented, some services were no longer offered and numerous clients were dropped.

Until the Sapin II Law enactment, PBRS was uncooperative, as the law did not permit settlements in such criminal matters. However, afterwards, the NFP recognized PBRS’ cooperation with authorities.

Given the seriousness of the matter, the DPA imposed an additional €71,575,422 fine, bringing PBRS’s total to the maximum available at law.

PBRS also had to indemnify the victims per the Sapin II Law, including the French Government, which was awarded damages for its €142,024,578 tax loss.

Altogether, PBRS paid €300,000,000, which HSBC Holdings guaranteed.

The advantage of DPA procedures over regular procedures is that defendants are not prohibited from participating in public procurement processes.

Incidentally, this is the major difference with World Bank procedures. It debars companies engaged in corruption or collusion from participating in any World Bank financed public procurement market. This was the case for the French company Oberthur Technologies SA., debarred for 2.5 years. It was also debarred from procurements issued by other development banks as part of the cross–debarment procedure.

(1) Frédéric Ruppert, Avocat à la Cour, Attorney at Law, California State Bar, Frederic’s practice is mostly focused on M&A and Private Equity and also extends to other corporate and business matters and Corporate Governance. https://www.linkedin.com/in/frederic-ruppert-2218767/ Email:  ruppert@frlaw-avocats.com

(2) Maria Lancri, Avocat à la Cour, has had a career in both private practice and in-house. She is currently of Counsel at GGV, a Franco-German law firm and specializes in Compliance matters and Data Protection and also advises companies in France on how to set up their Compliance programs: http://gg-v.fr/equipes/maria-lancri/ Email: lancri@gg-v.net

Canada, Sentencing & Deferred Prosecution Agreements

Deferred Prosecution Agreements Regime: A Canadian Proposal

Diversion programs for those accused of criminal offences are not new in Canada.  In Québec, for example, first-time individual accused or accused suffering from a psychiatric or medical condition may participate in a diversion program, which results in the criminal charges being dropped.  Corporations may also benefit from diversion programs, such as the Competition Bureau’s Immunity and Leniency Programs.

Transparency International Canada (“TI Canada”), a non-governmental anti-corruption organization, released a report in July, 2017 “urging” the Canadian government to adopt a Deferred Prosecution Agreement (“DPA”) mechanism, modeled closely to the current regime in the U.K.  A DPA is an agreement between the prosecutor and the accused suspending outstanding charges and requiring the accused to fulfill a certain number of commitments.  Once the accused has completed its contractual undertakings, the prosecutor will drop the charges.

TI Canada’s Recommended DPA Mechanism

The proposed scheme, according to TI Canada, addresses all the pitfalls of the current DPA regime in the U.S., but retains all of the advantages, including encouraging greater enforcement and self-reporting, saving costs and resources for both parties, and promoting certainty and transparency for all stakeholders involved.

TI Canada recommends that the proposed DPA scheme only be available to corporate accused who are charged with economic crimes.  The DPA scheme would be legislatively enacted and judicially monitored to fulfill the underlying three objectives of financial reparations, sincere compliance reform, and accountability of individual wrongdoers.

Below is a summary of the proposed regime.

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Analysis, Canada, Sentencing & Deferred Prosecution Agreements

A New “Certainty” in Plea Bargaining

In R v Anthony-Cook[1], 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.

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Analysis, Canada, Sentencing & Deferred Prosecution Agreements

Corporate Compliance to Prevent Criminal Liability in Canada

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[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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