Tag Archives: anti-bribery

Analysis, Anti-Corruption & Bribery

Governance Response to Rumors of Bribery

Corporate board members devote significant time to financial oversight and strategy, while often neglecting steps needed to protect and promote its most important intangible asset – its culture and reputation. The negative effects of rumors of bribery and corruption can often be as problematics as clear accusations or even convictions.

Corporate boards would be well advised to assess the actual and potential impact that allegations of corruption and other unethical conduct may have on the share price of their company including their company’s market capitalization.

Corporate directors and officers have three general legal duties; the duty to act carefully, the duty to act loyally, and the duty to act lawfully. First, the duty of care of corporate directors and officers is a special case of the duty of care imposed throughout the law under the general heading of negligence. Laws builds on moral, policy, and experiential propositions. The law of negligence is no exception. The moral proposition that underlies the law of negligence is-that if a person assumes a role whose performance involves risk that affect others, this person is under a moral duty to perform that role carefully. Therefore, corporate directors and officers are under an obligation to take steps to affirmatively reduce risks, and an omission may be wrongful.

On this foundation of moral blame, the law of negligence has established a structure of legal blame or liability. The structure of legal blame under the law of negligence generally parallels the structure of moral blame. government officials are engaged by definition in governing, their decisions will often have adverse effects on other persons. When officials are threatened with personal liability for acts taken pursuant to their official duties, they may well be induced to act with an excess of caution or otherwise to skew their decisions in ways that result in less than full fidelity to the objective and independent criteria that ought to guide their conduct.

There are plenty of case studies that evaluate the impact that the loss of trust from key stakeholders resulting from public rumors and allegations can have. These stakeholders may be the general public and institutional investors but they also include existing and potential clients. Especially the institutional investors are increasingly sensitive to compliance related violations (or rumors thereof) by companies within their portfolio. As an example, the world’s largest pension fund (Norwegian Government Pension Fund) excluded ZTE from funding due to alleged corrupt behavior.

International authorities are beginning to establish a track record of corporate convictions and multi-million-dollar penalties. Recent and ongoing criminal prosecutions of individuals have also put executives on notice that they too will face the harsh consequences of violating anti-corruption laws including the U.S. Foreign Corrupt Practices Act (FCPA) or the Canadian Corruption of Foreign Public Officials Act (CFPOA).  Under Canada’s Integrity Regime, companies that do business with government also face suspension or debarment when charged or convicted under the CFPOA or similar foreign anti-corruption laws.

Internationally, cases have shown that enforcement agencies are going to continue to scrutinize anti-bribery and anti-corruption (ABC) compliance programs and will likely bring charges when violations are the result of willful or reckless conduct. In particular, enforcement agencies may bring charges when there is a failure to adequately ensure the existence of an effective ABC compliance program resulting in the failure to prevent violations of the law.

Therefore, board members and executives must protect their organizations and themselves, by effectively implementing a robust ABC compliance program, as well as maintaining effective detection and investigation procedures including continuous improvement of the effectiveness of any existing ABC compliance program.

Here are some practical suggestions that may be useful to Board members and senior executives:

• Sustained leadership on transparency and integrity is vital.

• Strong anti-corruption measures and repeated staff training is crucial.

• The compliance office must be answering directly to the CEO and report to the Board.

• When allegations occur, move quickly with a forensic audit and if criminal issues are uncovered turn them over to the appropriate authorities.

• Ensure that the staff remuneration is not an incentive to sell contracts at all cost.

• Make it clear in documentation that this is a “clean” company that does not bribe – this has been demonstrated to be a deterrent for bribe asking.

• Include in the external audit a review of the compliance on anti-corruption measures.

• Ensure full transparency in contract management.

• Publish who the real beneficial owners of their company and subsidiaries are.

• Beware of transfer pricing and tax evasion since it creates impoverishment in countries where the company is working; especially in the natural resources sector and in poorer countries.

Analysis, Anti-Corruption & Bribery, Anti-Money Laundering & Terrorist Financing, Canada, Europe

London Calling – The case of Skansen and UK Jurisdictional Reach for Corporate Bribery

The is a guest blog post by Nick Johnson, Q.C., from Exchange Chambers & Bright Line Law, London.

Southwark Crown Court is a designated centre for many of the UK’s serious fraud and white-collar crime jury trials. It is a drab building in a stunning location. There’s a spectacular view of Tower Bridge and the Tower of London over the river, obscured only by HMS Belfast, a WWII cruiser permanently moored as a museum and which, last Christmas, flew the Canadian flag in tribute to the participation of the Royal Canadian Navy in the Battle of North Cape. Hundreds of Canadian sailors served on British ships in the north, including eighty on the Belfast.

As the Maple Leaf flew, I acted for the MD of Skansen Interiors Ltd, a London based fit-out and refurbishment contractor, in a bribery case which concluded last April. The company itself and two of its directors faced charges under the Bribery Act 2010 (“UKBA”), relating to making improper payments in order to secure contracts for two City of London office refurbishments worth about £6m.

The case was a legal first in the UK in that the company, despite having carried out an internal investigation and self-reported to the UK National Crime Agency, then faced a Section 7 UKBA prosecution before a jury in the Crown Court. Section 7 has an unusually wide reach. A company itself is guilty of a criminal offence where a person associated with it bribed another, even where management might be completely unaware of the bribe. It is a rare form of corporate criminal strict liability, subject to a defence where the company can prove, on a balance of probabilities, that it had in place adequate procedures to prevent such conduct. Of course, the legislation is aimed at compelling a change in corporate culture when it comes to effective anti-bribery measures. Quite apart from the interesting questions the case posed as to what may amount to “adequate procedures” and why it was that an entirely co-operative company was not offered a UK Deferred Prosecution Agreement, the focus upon the Section 7 requirements was a clear reminder of how even a non-UK corporate could well end up in a UK criminal dock.

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Analysis, Anti-Corruption & Bribery

ISO 37001: The New Anti-Corruption International Standard

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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Analysis, Canada

Government of Canada Launches Federal Contracting Fraud “Tip Line”

On April 20, 2017, the Government of Canada introduced a new tool in the fight against federal fraud.[1] 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.[2] 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.

[1]       “Government of Canada launches tip line to help Canadians report federal contracting fraud”

[2]       “Report wrongdoing in government contracts and real property agreements”

Analysis, Anti-Corruption & Bribery

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

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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