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Make Your Voice Heard – Canada’s DPA Consultation Process

Soapbox

The Government of Canada has released this public consultation paper to consider the “possibility of introducing a Canadian deferred prosecution regime as an additional tool for prosecutors to be used in appropriate circumstances to address corporate crime.” The Government of Canada is seeking feedback until November 17th and I encourage you to make your voice heard.

Set forth below is the text of my submission to the Government of Canada urging it to reject DPAs. Among other things, my submission highlights that Canada’s justifications for DPAs are based on assumptions about DPAs in the U.S. that lack evidence or assumptions undermined by actual evidence.

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This letter responds to the request of the Government of Canada for feedback as it “consider[s] the possibility of introducing a Canadian deferred prosecution agreement (DPA) regime as an additional tool for prosecutors to be used in appropriate circumstances to address corporate crime.”

Specifically, this letter responds to Question 1: “In your view, what are the key advantages and disadvantages of DPA as a tool for addressing corporate criminal liability in Canada.”

To begin, I applaud the Government (as I likewise previously applauded the governments of the United Kingdom and Australia) for rejecting non-prosecution agreements (“NPAs”) to resolve allegations of foreign bribery.  I can only hope that the U.S. Department of Justice sees the wisdom of your decision and likewise abolishes NPAs (and other alternative resolution vehicles) in the FCPA context as I have long advocated.

Moreover, I applaud the Government for its critiques of the U.S. DPA regime including that the U.S. DPA model is “governed by policy” and “the role of the courts is fairly limited” in that “courts do not play a role in approving, or in overseeing the carrying out of, the terms of the agreement.” To the extent, Canada is to adopt a DPA regime (which I encourage it not to for the reasons highlighted below), following the U.S. model is not the best way to proceed.

The consultation discussion paper includes a section titled “What Other Jurisdictions are Doing” and references how “DPAs have been used extensively in the U.S. since the early 1990’s as an enforcement tool for corporate crime, particularly for Foreign Corrupt Practices Act offenses …”. However, a glaring deficiency in this portion of the discussion paper is the complete absence of any discussion of why a legal system like Canada’s, that only ascribes criminal liability to a business organization based on the acts or omissions of high-ranking corporate officials, even needs the DPA option.

Unlike the U.S. respondeat superior model in which a business organization can face corporate criminal liability to the extent any employee or agent engages in conduct in the scope of their employment or agency and intending to benefit, at least in part, the organization, Canadian law (generally speaking) requires that a “senior official” must be involved in the improper conduct for there to be corporate criminal liability. In other words, the main legal and policy reason for why the U.S. adopted DPAs is simply not present in Canada as a Canadian corporation does not face corporate criminal liability to the extent a U.S. corporation does.

Given that a business organization under Canadian law can only face legal liability based on the acts or omissions of high-ranking corporate officials, a DPA would seem to represent “under-prosecution” of egregious corporate conduct. The Government of Canada seems mostly concerned that a traditional criminal prosecution of such a company might result in the disqualification of the company from “receiving procurement contracts under conviction-based debarment regimes.” If that is the concern, perhaps a better approach might be to revisit debarment regimes rather than advocating a radical departure from Canadian legal traditions.

The consultation discussion paper seems to suggest that the traditional way of prosecuting corporate crime in Canada is “often challenging,” “time-consuming and resource-intensive” and that conduct may be “difficult to prove.” These are not problems, at least to the extent one values quality over quantity, as accusing someone (whether a natural person or legal person) of a crime was never intended to be easy or quick.

In addition to the above, a concern I have with the discussion paper is it is based on assumptions from the U.S. DPA experience that either lack evidence, or more problematic, assumptions that are undermined by actual evidence.

One assumption in the discussion paper is that “the prospect of a DPA may encourage self-disclosure of misconduct, thereby enhancing detection and enforcement.” Stated elsewhere in the discussion paper, “the prospect of being invited to negotiate a DPA may motivate companies to self-disclose wrongdoing since they may otherwise have to face the prospect of a formal criminal conviction, whether as a result of a guilty plea or following a trial.”

However, there is no evidence that DPA’s encourage self-disclosure. The DOJ has been using DPAs (and other alternative resolution vehicles) to resolve alleged instances of corporate FCPA liability since 2004 and have long encouraged business organizations to self-disclosure FCPA conduct. Yet there is no evidence that DPAs are encouraging self-disclosure. Indeed, the DOJ’s launch of an FCPA Pilot Program in April 2016 was largely motivated by the DOJ’s recognition that its long-standing efforts spanning over a decade (including through use of DPAs) to motivate self-disclosure were not successful. In the words of the DOJ’s then Assistant Attorney General for the Criminal Division, the goal of the pilot program is to “encourage self-reporting” because companies have information about individuals who have violated the FCPA and have documents relevant to FCPA violations. If DPA’s encouraged self-disclosure as the Government of Canada asserts, there would have been no reason for the DOJ to unveil the FCPA Pilot Program in April 2016.

Another assumption in the discussion paper is that DPAs can “deter wrongdoing” and “may be more effective than criminal prosecution in improving compliance and corporate culture …”. Here again, there is no evidence for these assertions and actual evidence undermines the assertions.

There is no reliable evidence to suggest that alternative resolution vehicles used to resolve alleged FCPA offenses has enhanced compliance or the accountability of business organizations resolving such offenses. Indeed, the Organization for Economic Co-operation and Development (“OECD”) report on FCPA enforcement observed that the “actual deterrent effect [of NPAs and DPAs] has not been quantified,” and it requested that the U.S. “[m]ake public any information about the impact of NPAs and DPAs on deterring the bribery of foreign public officials.” The DOJ’s response to this request stated:

“Scholars have recognized that quantifying deterrence is extremely difficult. This is equally true for the deterrent effect of DPAs and NPAs. Thus . . . measuring ‘the impact of NPAs and DPAs in deterring the bribery of foreign public officials’ would be a difficult task, save providing certain anecdotal and other circumstantial evidence. One of the best sources of anecdotal evidence demonstrating that DPAs and NPAs have a deterrent effect comes from the companies themselves. The companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”

Moreover, the assertion that DPAs deter and/or increase compliance is undermined by the fact that several companies that resolved alleged FCPA offenses through DPAs (Aibel Group Ltd., Marubeni, Biomet, Orthofix, etc.) have since become FCPA repeat offenders or are currently under FCPA scrutiny yet again.

Finally, it is interesting to note that the discussion paper contemplates DPAs to be used only in “appropriate circumstances.” Well, that’s how things started off in the U.S. In 2008 when NPAs and DPAs were first explicitly mentioned in DOJ official policy documents, the DOJ stated:

“In certain instances, it may be appropriate . . . to resolve a corporate criminal case by means other than indictment. Nonprosecution and deferred prosecution agreements, for example, occupy an important middle ground between declining prosecution and obtaining the conviction of a corporation.”

Far from being used only “in certain instances” or functioning as a “middle ground,” since 2010 approximately 90% of DOJ corporate FCPA enforcement actions have used, in whole in part, alternative resolution vehicles.

For all of the above reasons, Canada should say “no” to DPAs to resolve foreign bribery offenses.

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