In-House Counsel Alert:
Foreign and Domestic Corruption
Kristine Robidoux, QC
Glen Jennings
Agenda
1. Corruption generally
2. Legislative framework
3. The Corruption of Foreign Public Officials Act
4. Enforcement D...
3
International Corruption: The Problem
• Global “cultures of corruption”
• In some countries bribery has been accepted as...
Corruption Around the World Today
4
Assessing Risk Country-by-Country
5
6
So why do we care?
• Companies want principled and ethical business
• Conduct operations in compliance with internationa...
Closer to Home
• Quebec’s Charbonneau Commission inquiry – no sign of
ending anytime soon
• SNC-Lavalin
• McGill Universit...
1. Legislative Framework
8
Domestically
• Criminal Code of Canada
• Section 426 – “secret commissions”
• Sections 119-125 – corruption of government ...
Evolution of Foreign Corruption Laws
• First, the U.S. Foreign Corrupt Practices Act (“FCPA”) – 1977
• SEC investigation: ...
11
Canada: Corruption of Foreign Public Officials Act
• Applies to any business, profession, trade, undertaking of
any kin...
CFPOA – The Offence
Bribing a foreign public official
1. making, offering or promising
2. a payment, reward, advantage or ...
CFPOA – Some Examples
The “obvious bribe”
• clandestine transfer of suitcase full of cash
• typically reserved for Hollywo...
CFPOA - Defences
No person is guilty of bribery:
1. If the payment is permitted or required under the written local
laws, ...
15
CFPOA – Facilitating Payments
• Small (“grease”) payments
• They are not payments made to obtain discretionary,
excepti...
CFPOA - Penalties
• Corporations:
• Unlimited fines
• Corporate probation
• Debarment from government contracting
• Crimin...
17
US FCPA
1. “US Issuers”
2. “Domestic concerns”
3. Any person who, while within the territory of the U.S., uses
means or...
18
UKBA
• Most broadly applicable and greatest jurisdictional reach
• Criminalizes bribery of public officials and commerc...
2. CFPOA Enforcement
19
20
Canadian Enforcement Activity
• RCMP – sole enforcement body under CFPOA
• RCMP – recent re-alignment to allow for grea...
21
CFPOA Convictions
2005 – HydroKleen
• $25,000 fine (less than the amount of the bribe)
• Payments to US Customs and Imm...
22
CFPOA Convictions
2013 – Griffiths Energy International Inc.
• First, a $2M consulting agreement with Ambassade du Tcha...
By Comparison: US FCPA Enforcement
23
• Hundreds of investigations and settlements:
1. Siemens (Germany): $800 million in ...
Recent Enforcement Developments
1. Increased enforcement
2. Voluntary disclosure & cooperation
• Griffiths Energy Internat...
3. Analysis of the Griffiths Energy Case
– Lessons For In-House Counsel
25
Griffiths Energy International Inc. (“GEI”)
• Calgary-based energy company operating in Chad
• New management discovered q...
GEI - 2009
• GEI retains legal counsel to assist its entry into Chad
• Several attempts to engage with Chadian Ambassador ...
GEI - 2009
• Consulting agreement #1
• Multiple versions drafted by legal counsel
• Multiple revisions by client
• No coun...
GEI - 2009
• Services to be provided under the agreement were
generally described as providing advisory, logistics,
operat...
GEI - 2009
• Counsel advised client that it was illegal to contract with
the Ambassador
• Agreement dated August 30, 2009 ...
GEI - 2009
• Letter dated September 2, 2009 terminating Ambassade
du Tchad agreement
• September 10, 2009 new company Chad...
GEI - 2011
• Company moves to Calgary, new legal counsel appointed
• First task assigned, "extend or re-do (this) consulti...
GEI - 2011
• Consulting agreement #3 drafted by new counsel
• Latest drafts dated mid-January 2011, with agreement
set to ...
GEI - 2011
• COCL's banking details are forwarded to new counsel by
the Deputy Chadian Ambassador to Canada
• Counsel requ...
35
Addressing High Risk Areas – Third Parties
• Address high-risk areas
• Third parties represent disproportionately high ...
36
Addressing High Risk Areas – Third Parties
Recommended due diligence steps to include (as appropriate):
1. Gathering fa...
37
Addressing High Risk Areas – Third Parties
• Include prescribed anti-corruption clauses and
protections as appropriate ...
Thank You
montréal · ottawa · toronto · hamilton · waterloo region · calgary · vancouver · beijing · moscow · london
Krist...
Upcoming SlideShare
Loading in …5
×

In house Counsel Alert: Foreign and Domestic Corruption Presentation

1,584 views
1,490 views

Published on

In this audio presentation, Glen Jennings and Michael Misener (standing in for Kristine Robidoux) from Gowlings discuss Foreign and Domestic Corruption including, an overview of corruption globally; an outline of the Canadian legislative framework; and a discussion of some key case studies. They provide in-depth analysis of the Griffiths Energy Case and highlight what in-house counsel can learn from it.

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,584
On SlideShare
0
From Embeds
0
Number of Embeds
913
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • 9 of 10 are non-U.S. companies
  • In house Counsel Alert: Foreign and Domestic Corruption Presentation

    1. 1. In-House Counsel Alert: Foreign and Domestic Corruption Kristine Robidoux, QC Glen Jennings
    2. 2. Agenda 1. Corruption generally 2. Legislative framework 3. The Corruption of Foreign Public Officials Act 4. Enforcement Developments 5. Analysis of the Griffiths Energy Case – Lessons for In-House Counsel 2
    3. 3. 3 International Corruption: The Problem • Global “cultures of corruption” • In some countries bribery has been accepted as a necessary evil of doing business • In other countries bribes were tax deductible business expenses – creating an uneven playing field for international businesses • Global anti-corruption movement – level the playing field
    4. 4. Corruption Around the World Today 4
    5. 5. Assessing Risk Country-by-Country 5
    6. 6. 6 So why do we care? • Companies want principled and ethical business • Conduct operations in compliance with international and local law • It protects a company’s reputation • It minimizes the risk of regulatory fines, penalties and lost licenses • It promotes growth. It’s a competitive advantage with clients • It “raises the bar” • It provides a “safety net” for when formal controls may turn out to be weak or absent • In the war for talent, it’s a retention tool • It promotes the rule of law in the countries where companies operate Increased Focus on Anti-Corruption
    7. 7. Closer to Home • Quebec’s Charbonneau Commission inquiry – no sign of ending anytime soon • SNC-Lavalin • McGill University Hospital contract • Pierre Duhaime (ex-CEO) • ORNGE Air Ambulance (Ontario) • Chris Mazza (ex-CEO) 7
    8. 8. 1. Legislative Framework 8
    9. 9. Domestically • Criminal Code of Canada • Section 426 – “secret commissions” • Sections 119-125 – corruption of government employees, judges, peace officers etc • Breach of trust by public officer • New Quebec laws addressing integrity of public contracting • Integrity in Public Contracts Act • Anti-Corruption Act • Creates systems to audit entities entering into contracts with public bodies as well as impose conditions and a requirement for such entities to obtain and maintain authorization 9
    10. 10. Evolution of Foreign Corruption Laws • First, the U.S. Foreign Corrupt Practices Act (“FCPA”) – 1977 • SEC investigation: 400 American companies admit to bribing foreign public officials • Could bribe foreign officials with impunity, but not domestic • Global anti-corruption movement • Leveling the playing field (tax deductible bribes) • OECD Anti-Bribery Convention – 1997 • Signatories required to criminalize bribery of foreign public officials • Canada’s Corruption of Foreign Public Officials Act (“CFPOA”) – 1998 • Canada’s foreign anti-bribery law (response to Convention) 10
    11. 11. 11 Canada: Corruption of Foreign Public Officials Act • Applies to any business, profession, trade, undertaking of any kind carried on in Canada or elsewhere • Criminalizes the act of giving a reward, advantage or benefit of any kind to a foreign public official • in exchange for an act or omission to act in connection with the performance of that official’s duties, or • to induce the official to use his or her position to influence acts or decisions of the foreign state • Recent amendments • eventual elimination/phase-out of facilitation payments exception • broad jurisdiction • books and records requirements • increased penalties
    12. 12. CFPOA – The Offence Bribing a foreign public official 1. making, offering or promising 2. a payment, reward, advantage or benefit of any kind 3. directly or indirectly 4. to a foreign public official 5. or to any person for the benefit of a foreign public official 6. for the purpose of obtaining or retaining an advantage in the course of business 7. where no defence applies 12
    13. 13. CFPOA – Some Examples The “obvious bribe” • clandestine transfer of suitcase full of cash • typically reserved for Hollywood! The “less obvious bribe” • retention of certain government-friendly agents and contractors • kickbacks • fees, commissions, “fines” when payable to an individual • gifts • hospitality/entertainment • travel • employment • favours or other services • charitable or political contributions 13
    14. 14. CFPOA - Defences No person is guilty of bribery: 1. If the payment is permitted or required under the written local laws, or 2. If the payment represents reasonable expenses incurred in good faith relating directly to the promotion, demonstration or explanation of products or services, or to the execution or performance of a contract between the person and the foreign state for which the public official performs duties or functions 14
    15. 15. 15 CFPOA – Facilitating Payments • Small (“grease”) payments • They are not payments made to obtain discretionary, exceptional or other improper business advantage but rather to expedite or secure the performance of routine, non-discretionary governmental action • Ex., obtaining permits, licenses, visas, work orders to allow a person to do business in a foreign country, providing police protection, mail delivery or phone service, scheduling inspections or the loading or unloading of cargo, etc. • Illegal under UK law • Historically legal under CFPOA, but recent amendments call for their elimination over time • Legal under US law
    16. 16. CFPOA - Penalties • Corporations: • Unlimited fines • Corporate probation • Debarment from government contracting • Criminal forfeiture • Individuals: • Up to 14 years’ imprisonment • Probation • Debarment from government contracting 16
    17. 17. 17 US FCPA 1. “US Issuers” 2. “Domestic concerns” 3. Any person who, while within the territory of the U.S., uses means or instrumentality of interstate commerce to take any act in furtherance of a corrupt payment: • Mail (including email and other electronic communications) • U.S. banking system, including wire transfers to/from US bank, US dollar-denominated wire transfer between foreign banks that clear through correspondent accounts in the US and currency conversion • Telephone and other communication devices • Interstate transportation, including travel on US-registered air carriers, or travel in, to or through the US • Etc.
    18. 18. 18 UKBA • Most broadly applicable and greatest jurisdictional reach • Criminalizes bribery of public officials and commercial bribery • In addition, creates the strict liability corporate offence of failing to prevent bribery, rebuttable with proof of “adequate procedures” to prevent the violation, in 6 areas: 1. Proportionate Procedures 2. Top-level Commitment 3. Risk Assessment 4. Due Diligence 5. Communication and Training 6. Monitoring and Review • Few indications yet as to how UK courts will interpret its provisions
    19. 19. 2. CFPOA Enforcement 19
    20. 20. 20 Canadian Enforcement Activity • RCMP – sole enforcement body under CFPOA • RCMP – recent re-alignment to allow for greater integration between specialized investigators across the country • One team located in Calgary, the other located in Ottawa • Canadian enforcement activity to date – subject of much international criticism • 2013: RCMP announced it has 34 open investigations
    21. 21. 21 CFPOA Convictions 2005 – HydroKleen • $25,000 fine (less than the amount of the bribe) • Payments to US Customs and Immigration official to ease entry of Canadian employees to the US 2011 – Niko Resources Ltd. • Exclusive use of luxury SUV to Minister of Energy, plus a non-business trip from Calgary to New York • $9.5M fine • Three years corporate probation
    22. 22. 22 CFPOA Convictions 2013 – Griffiths Energy International Inc. • First, a $2M consulting agreement with Ambassade du Tchad LLC • Next, identical consulting agreement with Chad Oil Consulting Ltd. • Troubling facts: the role of legal counsel and the absence of due diligence • Voluntary disclosure and full cooperation • $10.35M fine, but no corporate probation 2013 – Nazir Karigar • Bribes paid by the company’s sales agent to the Indian Minister of Civil Aviation and employees of Air India to influence sale of facial recognition software • First individual to be convicted under CFPOA; sentencing TBA
    23. 23. By Comparison: US FCPA Enforcement 23 • Hundreds of investigations and settlements: 1. Siemens (Germany): $800 million in 2008 2. KBR / Halliburton (USA): $579 million in 2009 3. BAE (UK): $400 million in 2010 4. Snamprogetti / ENI (Holland/Italy): $365 million in 2010 5. Technip (France): $338 million in 2010 6. JGC Corporation (Japan) $218.8 million in 2011 7. Daimler AG (Germany): $185 million in 2010 8. Alcatel-Lucent (France): $137 million in 2010 9. Magyar Telekom / Deutsche Telekom (Hungary /Germany): $95 million in 2011 10. Panalpina (Switzerland): $81.8 million in 2010
    24. 24. Recent Enforcement Developments 1. Increased enforcement 2. Voluntary disclosure & cooperation • Griffiths Energy International • Cardero Resources • Nordion 3. Charges against individuals • Nazir KARIGAR (CryptoMetrics) • Kevin Wallace, Ramesh SHAH & Mohammad ISMAIL (SNC-Lavalin) 4. Intersection of Domestic & Foreign Corruption • SNC-Lavalin • ORNGE air ambulance/AgustaWestland 5. Extraterritorial Reach • CFPOA/FCPA/UKBA • FCPA implications on negotiations with First Nations 24
    25. 25. 3. Analysis of the Griffiths Energy Case – Lessons For In-House Counsel 25
    26. 26. Griffiths Energy International Inc. (“GEI”) • Calgary-based energy company operating in Chad • New management discovered questionable consulting agreements in October 2011 as underwriters conducting due diligence in anticipation of IPO • IPO withdrawn while Gowlings conducts robust internal investigation • Stand-still by Canadian and US authorities 26
    27. 27. GEI - 2009 • GEI retains legal counsel to assist its entry into Chad • Several attempts to engage with Chadian Ambassador to Canada in order to be introduced to President of Chad and other decision-makers • Legal counsel travels with former company director to Chad 27
    28. 28. GEI - 2009 • Consulting agreement #1 • Multiple versions drafted by legal counsel • Multiple revisions by client • No counterparty name or other identifying details 28
    29. 29. GEI - 2009 • Services to be provided under the agreement were generally described as providing advisory, logistics, operational and other assistance with respect to implementing GEI's oil and gas projects in Chad • Compensation of USD $2 million payable upon successful negotiation and execution of PSC in Chad • Term: August 30, 2009 - December 31, 2009 29
    30. 30. GEI - 2009 • Counsel advised client that it was illegal to contract with the Ambassador • Agreement dated August 30, 2009 between GEI and Ambassade du Tchad LLC • Sole director and shareholder is Mahamoud Adam Bechir, Chad's Ambassador to Canada, US and three other countries ("the Ambassador") 30
    31. 31. GEI - 2009 • Letter dated September 2, 2009 terminating Ambassade du Tchad agreement • September 10, 2009 new company Chad Oil Consulting Ltd. ("COCL") incorporated, with sole director and shareholder being Nouracham Bechir Niam, the wife of the Ambassador • Consulting agreement #2 dated September 15, 2009 between GEI and COCL • Identical terms and compensation 31
    32. 32. GEI - 2011 • Company moves to Calgary, new legal counsel appointed • First task assigned, "extend or re-do (this) consulting agreement", using the name of COCL as the counterparty • Attached in PDF: signed Ambassade du Tchad LLC agreement • Reminder email one week later, again attaching PDF of signed Ambassade du Tchad LLC agreement • Third email attaches, in Word version, COCL agreement 32
    33. 33. GEI - 2011 • Consulting agreement #3 drafted by new counsel • Latest drafts dated mid-January 2011, with agreement set to expire February 28, 2011 • Compensation to be USD $2 million if PSC successfully negotiated and executed 33
    34. 34. GEI - 2011 • COCL's banking details are forwarded to new counsel by the Deputy Chadian Ambassador to Canada • Counsel requested to hold the $2 million in escrow, and subsequently disburses the funds from its trust account to COCL's bank account in Washington DC • Wire confirmations also exchanged between new counsel and the Deputy Ambassador 34
    35. 35. 35 Addressing High Risk Areas – Third Parties • Address high-risk areas • Third parties represent disproportionately high risk • Due diligence of agents and contractors: • Companies may be held criminally liable for the improper payments made or promised by its agents, contractors and other third party intermediaries. • The purpose of due diligence is to develop a reasonable, objective basis upon which management can proceed with a contract in the good faith belief that a third party will not make improper payments in the performance of company business.
    36. 36. 36 Addressing High Risk Areas – Third Parties Recommended due diligence steps to include (as appropriate): 1. Gathering factual information about the potential agent: • Ownership • Government Relationships • Qualifications • Reputation 2. Assessing compensation terms and bank account information 3. Checking references from previous relationships 4. Contacting trade organisations and embassies 5. Keeping good documentation of due diligence and references
    37. 37. 37 Addressing High Risk Areas – Third Parties • Include prescribed anti-corruption clauses and protections as appropriate for the degree of risk presented by that particular relationship • Commitment to comply • Right to audit • Expense reimbursement controls • Compensation must be appropriate • Maintain record of all sub-agents and sub-contractors • Annual certification of compliance
    38. 38. Thank You montréal · ottawa · toronto · hamilton · waterloo region · calgary · vancouver · beijing · moscow · london Kristine Robidoux, QC Leader, Global Business Integrity 403.298.1817 kristine.robidoux@gowlings.com Glen Jennings Partner 416.862.3537 glen.jennings@gowlings.com

    ×