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Sunday, September 16, 2012

Corporate Crimes for Employee Conduct - Bribery & Anti-Corruption

The Canadian Corruption of Foreign Public Officials Act (“CFPOA”) and the Criminal Code of Canada (the "Code") makes it an indictable offence for an individual or organization to (i) directly or indirectly (ii) offer or give or agree to offer or give (iii) an advantage or benefit (iv) in order to obtain or retain an advantage in the course of business (v) to a foreign public official or to any person for the benefit of the foreign public official (vi) either as consideration for, or to induce an act or omission by the foreign public official. In applying these provisions, corporate criminal liability may attach to an organization through the acts and intentions of its senior officers acting within the scope of their authority. In other words, the acts of such employees may create legal liability for the corporation itself.

In 2004 Parliament amended the Code to legislate the circumstances under which a corporation can be found guilty for a crime committed by an employee. These amendments were made in relation to occupational health and safety offences primarily, but have application in the anti-corruption context and the application of the CFPOA.  In future posts I would like to examine the relationship between OHS and anti-corruption in terms of corporate liability under the Criminal Code - as the provisions applicable to both largely overlap.

For a prosecutor applying these sections of the CFPOA or the Code, first it must be proven beyond a reasonable doubt that the corporation’s senior officer was acting with the intent, in whole or in part, to benefit the organization. Next, it must be proven on the same standard of culpability that the senior officer (a) was a party to the offence, acting within the scope of his or her authority; (b) directed the work of other representatives of the corporation so that they commit the offence, having the mental state required to be a party to the offence and acting within the scope of his or her authority; or (c) failed to take all reasonable measures to stop a representative of the corporation from being a party to the offence, knowing that he or she was a party or was about to be a party to the offence.

The Code defines “senior officer” as any director, partner, employee, agent or contractor who plays an important role either in establishing the organization’s policies or managing an important aspect of the organization’s policies or activities. It is clear that the criminal law definition of “senior officer” is more expansive than the corporate law concept. It pushes corporate criminal liability down to lower levels of management of a corporation in appropriate circumstances.

For an employee to be acting within the scope of his or her authority means acting within the sector of the corporate operation to which the employee is assigned. This is a broad concept that catches many, if not most, corporate functions. Therefore, it is possible that a senior officer working abroad who is responsible for managing an important aspect of the organization’s activities can attract corporate criminal liability if he or she bribes a foreign public official. Any member of the corporation, no matter the level, who commits a crime may attract corporate criminal liability if a senior officer was aware of the offence and failed to take reasonable measures to stop it.

The scope of “reasonable measures” has yet to be judicially considered. Is this offering a due diligence defence for corporations? It is not clear yet whether that is the case in Canada. Although Canadian courts have yet to address corporate criminal liability under to the CFPOA, there is jurisprudence with respect to Criminal Code (“Code”) offences that establishes corporate criminal liability for crimes committed by employees regardless of corporate due diligence. That is, regardless of whether or not the corporation had policies and procedures in place and had instructed the employee not to commit the offence. In terms of corporate criminal liability for true crimes, the Supreme Court of Canada has held that the presence of either general or specific instructions to employees prohibiting the criminal conduct in question is irrelevant and has no effect in law in protecting the corporation from criminal liability.

The UK Bribery Act does not afford corporations a due diligence defence with respect to the offence of bribing a foreign public official. However, it explicitly affords corporations a due diligence defence with respect to the offence of failing to prevent bribery. This means that even if the corporation committed the actus reus of the offence by failing to prevent bribery, it will be acquitted if it had adequate procedures in place to prevent the offence. The Code and CFPOA do not explicitly afford corporations the defence of adequate measures with respect to bribery. Nor does the US Foreign Corrupt Practices Act, although experience has shown that prosecurtorial discretion and sentencing can be greatly affected by the existence of a compliance oriented governance system for companies whose employees have violated the rules to commit bribery.

While it remains unclear in Canada whether anti-bribery policies and procedures will be sufficient to protect corporations from criminal liability for acts committed by their employees contrary to the CFPOA. Nevertheless, a robust CFPOA compliance program is necessary to managing risks presented by certain business activities so that employees do not commit bribery.

A proper governance system designed to prevent bribery is still the best preventative measure a corporation could adopt - in Canada, the UK, US or anywhere.  An ounce of prevention is truly worth a pound of cure when it comes to the risk of employees commiting bribery offences - especially considering the potentially huge costs of prosecutions. While anti-bribery policies and procedures are excellent starting points, it is clear that compliance requires more – with proper training, communication, monitoring and follow-up being critical to avoiding the reputational and legal risks associated with being investigated for and charged with corrupt practices.

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