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Canada’s OECD Article 5 Moment

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Article 5 of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions states: “Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”

As highlighted here and prior posts here and here, OECD Convention signatory countries such as the United States and the United Kingdom have seemingly violated Article 5 in connection with certain enforcement actions, so it is not surprising that Canada (also a signatory country) is also having an Article 5 moment.

Since 2013 SNC-Lavalin (a leading engineering and construction company based in Canada) has been the subject of a bribery and corruption scandal concerning projects in Bangladesh and certain countries in Africa. Prior posts here, here, and here have highlighted how SNC-Lavalin has pouted in that companies in certain other peer countries are often provided alternative resolution agreements – such as deferred prosecution agreements – allowing them to escape the most serious consequences of their alleged criminal conduct.

In the minds of many, SNC-Lavalin’s scrutiny was a major reason why Canada adopted a DPA regime in 2018 (albeit much different than the U.S. model) (see here).

Yet, Canadian prosecutors seem unwilling to offer SNC-Lavalin a DPA and SNC-Lavalin has continued to pout.

Last week, Canada’s Globe and Mail reported:

After former justice minister and attorney-general Jody Wilson-Raybould was shuffled to veterans affairs on Jan. 14, she released a lengthy statement listing her legislative accomplishments in the portfolio and underlining the need for independence.

Prime Minister Justin Trudeau’s office attempted to press Jody Wilson-Raybould when she was justice minister to intervene in the corruption and fraud prosecution of Montreal engineering and construction giant SNC-Lavalin Group Inc., sources say, but she refused to ask federal prosecutors to make a deal with the company that could prevent a costly trial.

SNC-Lavalin has sought to avoid a criminal trial on fraud and corruption charges stemming from an RCMP investigation into its business dealings in Libya. Prosecutors alleged in February, 2015, that SNC paid millions of dollars in bribes to public officials in Libya between 2001 and 2011 to secure government contracts. The engineering company says executives who were responsible for the wrongdoing have left the company, and it has reformed ethics and compliance rules.

After the charges, SNC-Lavalin lobbied officials in Ottawa, including senior members in the office of Mr. Trudeau, to secure a deal known as a “deferred prosecution agreement” or “remediation agreement” that would set aside the prosecution. In such deals, which are used in the United States and Britain, a company would accept responsibility for the wrongdoing and pay a financial penalty, relinquish benefits gained from the wrongdoing and put in place compliance measures. “It is unfair that the actions of one or more rogue employees should tarnish a company’s reputation, as well as jeopardize its future success and its employees’ livelihoods,” SNC argued in a brief to federal officials in October, 2017.

But in October, 2018, SNC-Lavalin hit a major obstacle. The federal director of public prosecutions refused to negotiate a remediation agreement that would have resolved the Libyan fraud and corruption charges without prosecution. SNC-Lavalin has asked for a judicial review of the decision, citing “the extremely negative consequences the underlying legal proceedings have had and will continue to have [even in the event of an acquittal] on [SNC] and innocent stakeholders, including employees, suppliers, pensioners and stakeholders, in the absence of an invitation to negotiate.”

Sources say Ms. Wilson-Raybould, who was justice minister and attorney-general until she was shuffled to Veterans Affairs early this year, came under heavy pressure to persuade the Public Prosecution Service of Canada to change its mind.

Ms. Wilson-Raybould was unwilling to instruct the director of the public prosecution service, Kathleen Roussel, to negotiate a remediation agreement with SNC-Lavalin, according to sources who were granted anonymity to speak directly about what went on behind-the-scenes in the matter.

The Prime Minister’s Office issued a short statement when asked to comment on efforts to persuade Ms. Wilson-Raybould to intervene.

“Prime Minister’s Office did not direct the attorney-general to draw any conclusions on this matter,” press secretary Chantal Gagnon said in an e-mail to The Globe and Mail on Wednesday evening.

On Thursday at a transit-related appearance in Vaughan, Ont., Mr. Trudeau further denied that senior officials in the PMO “directed” Ms. Wilson-Raybould in her previous roles to intervene in the SNC-Lavalin case, but he would not say whether they tried to influence her to abandon a prosecution and trial of the Montreal corporate giant.

Prime Minister Justin Trudeau is denying that his office ‘directed’ former attorney general Jody Wilson-Raybould to help SNC-Lavalin avoid a criminal prosecution. The Globe and Mail never reported that officials in Mr. Trudeau’s office had directed Ms. Wilson-Raybould to take action – only that she was pressured to do so and declined.

“The allegations reported in the story are false. At no time did I or my office direct the current or previous attorney-general to make any particular decision in this matter,” Mr. Trudeau told reporters.

The Globe and Mail never reported that officials in Mr. Trudeau’s office had directed Ms. Wilson-Raybould to take action – only that she was pressured to do so and declined.

Asked if the PMO exerted any influence whatsoever, Mr. Trudeau said: “As I’ve said, at no time did we direct the attorney-general, current or previous, to make any decision whatsoever in this matter.”

[…]

SNC-Lavalin, Canada’s largest engineering and construction management company, is one of Quebec’s biggest corporations and has a reputation for holding political sway in Quebec City and Ottawa.

One well-connected Liberal with close ties to SNC-Lavalin said Ms. Wilson-Raybould “blew off the PMO” requests. The company had told the government it was in dire circumstances and required a suspension of criminal charges to ensure it continued on a solid footing.

The Trudeau government in 2018 amended the Criminal Code to allow deferred-prosecution agreements that let prosecutors suspend criminal charges against Canadian companies found to have committed wrongdoing. The measure was inserted in the 2018 budget after a brief consultation in 2017.

Liberal insiders said Ms. Wilson-Raybound knew this legislative change was meant to help SNC-Lavalin out of the legal troubles that were weighing on the price of its shares. A conviction on the fraud and corruption charges could result in a 10-year ban from federal government contracts – a development that would lead to layoffs.

Since the beginning of 2017, representatives of SNC-Lavalin met with federal government officials and parliamentarians more than 50 times on the topic of “justice” and “law enforcement,” according to the federal lobbyists registry. This includes 14 visits with people in the PMO. Those they met included Gerald Butts, principal secretary to the Prime Minister, and Mathieu Bouchard, Mr. Trudeau’s senior adviser on Quebec – whom they met 12 times. Mr. Trudeau’s senior policy adviser, Elder Marques, also met with company representatives.”

As stated in this column:

“As former federal prosecutors specializing in economic crime and now academics who follow these cases closely, we are deeply disturbed by recent allegations that the Trudeau government pressed for the SNC-Lavalin prosecution to be settled via a remediation agreement. The aim, of course, would have been to find a way to spare the engineering and construction giant the consequences of a criminal conviction. After all, organizations that have been convicted of such offences are blacklisted from bidding on government contracts, in Canada and abroad.

The government may have felt the potential economic impact of a conviction was too great and that the case should be settled. But given the serious nature of the corruption at issue, it was incumbent on prosecutors, examining all the evidence and taking into account the public interest, to decide whether that trade-off of accountability versus economic impact was appropriate. Even if they have decided to undertake negotiations with SNC with a view to settling with a remediation agreement, ultimately that agreement would have to satisfy a judge. Economic effects are not a trump card in the weighing of factors.

This incident has shone a light on the still relatively unknown remediation-agreement process. Eyebrows were raised when the government slipped an amendment to the Criminal Code into a 500-page omnibus budget bill early last year that provided for this new mechanism for dealing with corporate offenders, which is known as a deferred prosecution agreement in other jurisdictions. Remediation agreements allow corporate accused to avoid prosecution and, critically, a finding of guilt, in exchange for an admission of responsibility, payment of pecuniary penalties and a demonstrated commitment to internal reforms. Many observers believed that the introduction of this new regime was an opaque effort to unburden SNC-Lavalin of its criminal charges.

Given this, it was a surprise to learn in October, 2018, that SNC-Lavalin would not be entering into a remediation agreement with the Crown because the Attorney-General would not agree to do so. The company then launched a bizarre PR campaign in an effort to obtain public support for its position, including a full-page newspaper ad, in which it argued that it was being treated unfairly, had cleaned up its act and did not deserve to be prosecuted.

To the credit of the former justice minister and the prosecution service, these efforts did not change the decision not to negotiate. But the new allegations suggest that the lobbying efforts of SNC may have gone much further, reaching all the way into the Prime Minister’s Office. One may wonder whether this situation, if true, is a one-off or indicative of something more pervasive.”

As stated in this column:

“[T]ransparency is the thing here. On the substance, you could make a case for either throwing the book at SNC-Lavalin or letting it settle. But the public should know if the Prime Minister is trying to turn that legal decision into a political one.

This is a blockbuster bribery prosecution. The company is charged with bribing Libyan officials under the regime of late dictator Moammar Gadhafi between 2001 and 2011.

The prosecution is under the purview of the director of public prosecutions, Kathleen Roussel, whose office was established in 2006 to assure Canadians such cases would be kept at arm’s length from politicians. If the justice minister wants to intervene, he or she has to do it by issuing a directive in writing, on the public record. Even so, they’re expected to make a prosecutorial decision not a political one.

There were reasons for the PMO to be worried about the SNC-Lavalin case. A conviction would earn the company a 10-year ban on bidding on public projects. There might be layoffs. There was speculation that it would be a takeover target – and that the head office of this prominent Quebec company could be moved.

There was also a legitimate question about whether the company should face severe sanction now, years later, after changing executives and business practices.

Last year, the Liberal government passed legislation to give prosecutors another option in such cases. It was widely assumed that they had SNC-Lavalin in mind. The new legislation allowed prosecutors to strike a deal that would see companies pay fines and agree to good behaviour, with the threat that the case would be revived if they transgressed again.

That’s not a bad idea, for some cases. But the government told the public that the intention was to give prosecutors an option they could use at their discretion – not a tool to allow the government to steer a case.

Prosecutors chose not to strike a deal with SNC-Lavalin.

Why? Probably because remediation agreements are really supposed to be a way to encourage companies that have paid bribes to voluntarily come clean, pay a penalty and move on.

But SNC-Lavalin did not volunteer. Letting a company strike such a deal because it is too important to prosecute raises the prospect of what economists call “moral hazard” – if companies know they won’t face serious sanction, they have no incentive to do the right thing.

Mr. Trudeau owes Canadians a full airing of what happened. Was there pressure? Canadians need to know that prime ministers don’t just dip their noses into criminal prosecutions − not without an explanation.”

For additional reporting, see herehere and here.

I’ve yet to see any mention of Article 5 of the OECD Convention in connection with the SNC-Lavalin coverage. Yet if the allegations are true that the Prime Minister and/or his office attempted to persuade prosecutors to go light on SNC-Lavalin, it would sure seem like a violation of the Article 5.

For what it is worth, I encouraged Canada not to adopt DPAs (See here and here for prior posts including my submission to the Canadian government encouraging it to say “no” to DPAs).

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