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Legal Notes: Anti-corruption codes of conduct need tight policy lids

John Bleasby
Legal Notes: Anti-corruption codes of conduct need tight policy lids

News broke three weeks ago that two former SNC-Lavalin executives may have engaged in forgery, fraud and conspiracy between 1997 and 2004. This relates to allegations that bribes may have been paid to help secure a repair contract for Montreal’s iconic Jacques Cartier Bridge. SNC-Lavalin itself has also been charged due the company’s implied responsibility for their executives’ alleged actions.

It seems like deja-vu all over again. It was only three years ago that the Canadian engineering giant was embroiled in another bribery affair, one involving the government of Libya. The difference this time is that these new charges trace back to work contracted in Canada.

Whether working with a foreign or domestic entity, Canadian companies can be heavily penalized for various forms of corruption. The Competition Law outlaws chicanery such as bid rigging, bid fixing and bid rotation. 

The same goes for bribery.

As Bruce Reynolds and Sharon Vogel of Singleton Urquhart Reynolds Vogel LLP write, “The federal Corruption of Foreign Public Officials Act (CFPOA) makes it an offence, punishable by fines and imprisonment, to bribe foreign officials to induce them to influence a foreign state action in awarding construction and engineering contracts.”

Persons or entities convicted can face exclusion from any future Canadian government contract work.

Corporations and management must find ways to prevent such incidents from occurring. First, they need to address any distortion of their corporate culture that might either support such conduct or the idea that corrupt actions can escape detection.

Some of this can be addressed in the form of a company code of conduct. Yet, that could require more than what meets the eye.

Lawyers from Borden Ladner and Gervais (BLG) describe a recent case surrounding a Canadian clean fuel technology company. The United States Securities Exchange Commission (SEC) found the company CEO had paid a bribe to a Chinese official, “to obtain a sales contract and a cash payment.”

The situation came under the scrutiny of the SEC because the company’s shares were inter-listed on the U.S. NASDAQ and the Toronto Stock Exchanges.

It leads BLG to suggest “prophylactic provisions” for corporate codes of conduct, that is, provisions that are judicially crafted and go further than might be first deemed necessary under federal-provincial laws or the constitution.

Specific to Canadian companies engaging in foreign work, BLG offers possible inclusions relating to the prophylactic nature of corporate codes of conduct concerning corruption.

“For Canadian companies at risk of foreign corruption violations, a blanket prohibition against foreign corrupt activity in a code of conduct is insufficient. Such prophylactic provisions could include requiring that all business arrangements be documented in writing, conducting pre-transaction due diligence, retaining the right to perform audits of third parties and mandating that contracts contain anti-bribery clauses.”

In their review of the clean fuel technology company case, BLG notes, “the SEC found that those provisions were not broad enough on their face to apply to the specific type of business transaction at issue.”

For that reason, BLG suggests that Canadian companies consider, “risk-mitigation provisions in their compliance policies (that) are broadly worded and flexible enough to cover all types of transactions that might pose risk to the organization.”

In addition to federal laws described above that penalize those engaging in bribery and corruption, authors Reynolds and Vogel point out that the Province of Quebec, “has instituted a number of specific measures aimed at combatting corruption and collusion in the construction industry based on recommendations arising out of the Charbonneau Commission’s Report.”

Interestingly, Reynolds and Vogel also note that volunteer reporting of corrupt practices is not required, either under the CFPOA or the Criminal Code of Canada. However, they add that, “whether a corporation has self-reported is a factor that may be considered by a prosecutor in its determination of whether negotiating a remediation agreement (ie, deferred prosecution agreements as a means of resolving criminal charges against businesses) is in the public interest.”

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com

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