Legal news and trends for Canadian in-house counsel and c-suite executives
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received such a censuring by the inter- national economic partnership, and per- haps deservedly so. Despite introducing legislation in 1999 aimed at punishing domestic companies engaged in corrupt practices abroad, the country had yet to land a single significant prosecution using its provisions. Fast forward to June 24 of this year, I when Niko Resources Ltd. was forced to pay a $9.5-million fine for contravening the Corruption of Foreign Public Offi- cials Act, and a much different picture has begun to appear. With the Calgary-based oil and natural gas exploration and pro- duction company admitting to provid- ing Bangladesh's junior energy minister a luxury SUV and trips to New York and Calgary, Canadian lawyers and enforce- ment officials finally had something tan- gible to hang their hats on when pleading their case to company executives. To be sure, experts now agree that Canada is moving full steam ahead in its efforts to clean up the laissez-faire approach to foreign bribery that many companies continue to demonstrate. And it will be up to in-house counsel to create and help enforce international anti-cor- ruption policies within their own orga- nizations. The traditional rationalization that, "This is just how they do business here," no longer applies. James Klotz, a partner with Miller Thomson LLP and president and chair- man of Transparency International (Can- ada) Inc., notes that the United States led the way with the creation of its foreign anti-corruption legislation in 1977. The U.S. expected other major economies to quickly fall in line and create their own versions of the Foreign Corrupt Practices Act. But it wasn't until 20 years later, in 1997, that OECD countries — Canada included — got together and agreed on an anti-corruption convention. n March of this year, Canada received a slap on the wrist from the Organisation for Economic Co-operation and Development for its approach to international anti-corrup- tion enforcement. It was the second time the country had In 1999, Canada created the Corrup- tion of Foreign Public Officials Act, which came into force in 2000. While the Niko prosecution was the first major victory for the RCMP under the act, there is general consensus that Canadian companies have not all been keeping their noses clean on the bribery front in their operations abroad. "It is not uncommon for Cana- dian companies to have been involved in corruption in doing business abroad," says Klotz. "While we don't typically pay bribes directly, Canadian companies have long used agents to facilitate the payment of bribes in countries where bribes were required. It has never really bothered any company to do that." Klotz points out that most of the com- panies he's seen get caught up in corrup- tion investigations have internal policies forbidding such behaviour. They also consistently fail to investigate potential breaches. "So they hire agents, and their agents do bribe paying, and what they don't know won't hurt them. At least, that's what they thought." As already noted, Canadian authorities have taken flak for their feeble approach to corruption abroad. The main criticism has come from the OECD, which targeted Canada's poor results in reports both in 2004 and earlier this year. The federal gov- ernment decided to act after the OECD's first call-out, creating an International Anti-Corruption Unit within the RCMP. The unit consists of 14 officers — seven in Calgary and seven in Ottawa, commit- ted solely to investigations of alleged bribe paying by Canadian companies abroad. There was awareness in the business com- munity during the past few years that the unit was working feverishly on numerous leads. Word spread this March that the unit had 23 ongoing investigations on its books, and there has since been specula- tion that this number has grown. "Many of those companies that are involved in the investigations may not yet know that they're under investigation," notes Klotz. "Often a company won't find out that they're under investigation until a search warrant is actually executed." The specialized unit's successful inves- tigation of Niko is being viewed as the first of many dominos to fall. "We do expect to see companies that have problems, that haven't wanted to come forward in the past, because there hadn't been a prosecu- tion and no one wanted to be the first," says Klotz. An absence of a voluntary disclosure program also made Canadian companies reluctant to come forward to report historic corrupt practices, as did the fact that doing so could also diminish or eliminate a company's attractiveness to foreign buyers, especially those in the U.S. Klotz suggests that details of the settle- ment in Niko could dramatically alter that approach. While the company was forced to pay a heavy fine at $9.5 million, prosecutors in the case indicated they would have sought a far higher sum had the company not issued a guilty plea. The man who helps lead the RCMP's anti-foreign corruption efforts believes the Niko prosecution is a "wake-up call" for Canadian companies operat- ing abroad. "We've been telling people for the last two years that we've been actively investigating corruption, but it wasn't until we brought something to the table to show that yes, we're out there, and the enforcement's on" that companies took notice, says Insp. Gord Drayton, who is in charge of the International Anti-Corruption Unit. He admits that before that watershed moment, lawyers often told him it was difficult to convince their clients to implement a meaningful anti-corrup- tion program. "Well, I think we just ended that," remarks Drayton. The added exposure the Niko pros- ecution has created surrounding the issue has been essential, says Drayton. "I really think that we aren't doing our job if we have to investigate and lay charges," he says. "The prevention side is always the general rule. If you have to lay the charge, it's already too late." He believes com- panies will now understand Canada is serious about enforcing its international anti-corruption legislation, and accord- ingly take the proper precautions. It's no surprise, however, that Cana- dian companies have been slow off the mark in terms of embracing a zero-toler- ance ethos surrounding the payment of INHOUSE OCTOBER 2011 • 25