But those attitudes are changing, experts say, in the wake of reputation-scarring foreign bribery scandals involving Canadian companies.
Stepped-up enforcement of this country’s anti-corruption laws — the RCMP says it had 35 active investigations as of February — is sending companies into a bit of a frenzy to ensure they have anti-bribery compliance policies and training in place.
For firms still entrenched in the belief that they’ve got to “grease the wheels” to do business overseas, the risk for them has never been greater, some experts say.
“They should be taking extra care their anti-corruption compliance program is truly robust. That’s the message,” said James Klotz, a Toronto-based international business lawyer.
“And if it’s not (robust), they should be scurrying to beef it up. These things happen quickly — corrupt activities happen like that.”
Bribes are commonly paid through hired “agents” in the foreign country. Companies don’t want the payments reflected in their accounting books, so they get these third parties — ostensibly hired to help them connect with local officials and to provide logistical support — to do the dirty work.
They achieve this by paying the agents “too much” for their services, said Peter Dent, national leader of Deloitte Forensic in Toronto. The excess money then gets passed on to the foreign official.
Years ago, when Canadian businesspeople ventured into a foreign market, Canadian embassy staff would recommend hiring a local agent and provide a list of names.
“Unfortunately, in many countries, the best agents were often people closely connected with the foreign government,” Klotz said. “Thus, there was almost a built-in process to allow fairly easy access to people who could facilitate improper transactions.”
In 1998, Canada aimed to clamp down on such practices with the passage of the Corruption of Foreign Public Officials Act.
But the law failed to come with much enforcement muscle.
Even after the RCMP formed a specialty anti-corruption unit in 2008, Canada continued to get a drubbing on the international stage for being too soft on foreign bribery.
In a 2011 report, Transparency International, an anti-corruption compliance-monitoring group, ranked Canada as having “little or no enforcement” among the most industrialized nations.
There had been only one prosecution under the anti-corruption law — and it resulted in a paltry $25,000 fine.
But Canada’s reputation began to turn around when, later that same year, a Calgary company pleaded guilty to a corruption charge.
Niko Resources Ltd. was fined $9.5 million because it’s subsidiary in Bangladesh had provided the former Bangladeshi state minister for energy and mineral resources the use of a $190,000 SUV, and covered the minister’s expenses for non-business trips to New York and Chicago.
Then in January of this year, Griffiths Energy International, also based in Calgary, was fined $10.3 million after pleading guilty to a corruption charge related to an oil and gas project in Chad.
Griffiths acknowledged entering into an agreement to pay $2 million cash to the wife of Chad’s ambassador to Canada and that would allow her and two others to purchase Griffiths shares at prices reserved for founders.
Meanwhile, investigators continue their probe into the activities of Montreal-based construction and engineering giant SNC-Lavalin in several countries, including Bangladesh, Libya and Algeria.
If they weren’t doing so already, “companies are now scrambling to ensure that they have compliance programs in place,” Klotz said.
Likely making companies even more skittish, the Harper government in February announced proposals to make Canada’s anti-corruption laws even tougher.
The proposed measures would lift the burden on investigators to show that the alleged offence had a “real and substantial” connection to Canada.
They would also get rid of an exemption on “facilitation payments” — money paid to a foreign official to speed up or secure the execution of a routine administrative procedure.
And they would increase the maximum jail time for a foreign bribery conviction from five years to 14 years.
Whereas in the past, there were only a handful of lawyers specializing in helping companies develop their anti-corruption compliance strategies, there’s now a whole cottage industry of them, experts say.
However, those giving advice acknowledge that the rules are not entirely black-and-white and differences of opinion exist over what limits there should be on gift-giving and grease payments.
Corruption is “insidious” and not always readily apparent, Klotz said. That’s why he tries to teach his clients to trust the “tickle in the tummy.”
He also teaches them to anticipate scenarios that might arise overseas. For instance: you’re a company building a plant in a foreign country. One of your engineers is waiting for a cement delivery. The cement arrives with an inspector who wants a thousand bucks. If you don’t pay him, the cement won’t get poured and there’ll be delays. What do you do?
One of his solutions: before the inspector even has a chance to ask for the money, teach the engineer to say, “‘Hey, thank you for being a tribute to your country, you’re incorruptible!’”
Even with robust training, some observers wonder if there’s enough incentive for companies to report wrongdoing when they see it.
A new management team at Griffiths Energy blew the whistle on itself following an internal investigation. But would other companies do the same?
Christine Silverberg, a Calgary lawyer and former chief of the Calgary police, co-wrote in an article last year that while the U.S. and Britain have created measures to “give corporations a degree of confidence that confessing their sins will usually result in leniency,” Canada has not provided the same “carrot.”
“Credit for self-reporting,” she wrote in email this week, “could encourage greater co-operation between law enforcement and the corporate world.”
Silverberg also wonders whether the RCMP have sufficient resources to carry out foreign corruption investigations, which can be expensive, complex and time-consuming. Both the Niko Resources and Griffiths Energy cases were resolved by quick guilty pleas — “not vigorously contested matters that tested the resolve and resources of the RCMP and Crown prosecutors,” she said.
“Indeed, in the Griffiths Energy case, the judge noted that the case may never have come before the courts had Griffiths Energy not self-reported the matter. It remains to be seen whether the RCMP and Crown prosecutors have the resources to pursue a vigorous enforcement regime in the absence of self-reporting and co-operation by defendants.”
The RCMP declined an interview request but in an email, it said that its seven-person anti-corruption teams in Calgary and Ottawa rely on “internal and external” methods to detect foreign bribery.
“Cases originate from a number of sources which can include other governments, other law enforcement agencies, businesses or organizations, to name a few,” the force said.
The RCMP acknowledged that bribery cases can be difficult to investigate, as they typically involve “at least two willing parties agreeing to commit a crime in secret.” But, the force added that “additional resources are available to investigations as necessary.”
Experts say the message is clear: corporate bosses who complain that enforcement actions create an uneven playing field and put them at a competitive disadvantage globally need to get their heads out of the sand.
“I still hear those complaints quite often today,” Dent said. “But the reality is that time has passed. … The die is cast. It’s too late. The law is the law.”
Original Article
Source: canada.com
Author: Douglas Quan
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