Canadian engineering firm SNC-Lavalin faces charges of paying CA$47.7 million (US$38 million) to Libyan officials to influence government decisions as well as defrauding organizations in that country through two of its subsidiaries, according to a
Canadian Press report. It is the latest corruption allegation involving the company's operations in Libya. The Royal Canadian Mounted Police (RCMP) previously had charged two former SNC-Lavalin executives as part of a corruption investigation that began in 2011. Also, the company's former construction vice president has testified that he bribed the son of former Libyan dictator Moammar Gadhafi to help the company earn contracts. If convicted in this latest case, the company could face a 10-year ban from bidding on government contracts.
The prosecution of SNC-Lavalin is the third, and by far the most significant, fraud case the RCMP has pursued under Canada's foreign anti-bribery law, the Corruption of Foreign Public Officials Act (CFPOA). Most of Canada's key trading partners have similar anti-bribery legislation, including the United States (Foreign Corrupt Practices Act) and the United Kingdom (Bribery Act 2010). Nations have enacted such laws in response to a long-term trend toward a global economy and the need to cooperate and establish cross-national legal and regulatory frameworks to protect governments, companies, and their citizens against fraud and corruption.
The CFPOA makes it a serious criminal offense for Canadian companies and individuals to bribe foreign government officials. Moreover, it is one of the tougher anti-corruption laws because the prohibition against bribery is broadly worded. Under the law, the purpose of the person paying the bribe is defined as obtaining an advantage in the course of business; bribery includes both direct and indirect (third party) bribery activity as well as conspiracy to offer or give bribes; and a bribe is defined as "anything of value." Each offense is punishable by up to 14 years in prison, and companies are liable for fines set at the court's discretion. Thus far, the largest fine imposed on a company under the CFPOA was CA$10.3 million (US$8.2 million) — five times the amount of the bribery involved. Companies that breach the CFPOA also may be banned from bidding on public-sector contracts in Canada and potentially abroad.
Some of the specifics of Canadian legislation and enforcement actions may not be precisely applicable to U.S. or international circumstances. However, companies that operate abroad and their internal auditors, as well as foreign companies that employ citizens of countries that have such anti-corruption legislation, need to be aware of these laws and take steps to comply. Furthermore, businesses need to be aware of the precise requirements of the anti-corruption laws in all countries in which they operate. This is best done through a compliance program that is based on an assessment of the risks the company faces, supported and verified regularly by the company's leadership, and backed by audit work by internal audit or an equivalent function.
Particular compliance elements that need attention — and that are relevant to the SNC-Lavalin case — include:
Good policies are a necessary but insufficient protection against bribery and corruption and their consequences. It's not enough to establish and globally monitor policies on ethics, conflict of interest, financial management — including accounting and reporting — and other areas. Criminal charges are not the only troubles faced by SNC-Lavalin. Class action lawsuits allege that SNC-Lavalin misled investors by claiming that it conducted itself as a "socially responsible citizen," and in compliance with a code of ethics, when it was actually paying bribes to Libyan government officials.
Cooperation with authorities also will not absolve or exonerate a company from the consequences of fraud and bribery. Although SNC-Lavalin cooperated with the RCMP investigation and strengthened its ethics and compliance policies along the way, the company still has been criminally charged.
Specific and detailed examination of on-the-ground practices needs to be conducted regularly. One of SNC-Lavalin's most senior executives already has been found guilty of making illegal payments totaling more than CA$56 million (US$44.7 million) to third-party agents in Libya, which were never appropriately recorded. The CFPOA makes it a criminal offense to falsify books and records for the purpose of bribing a foreign government official or of hiding bribery.
Internal auditors also should be looking for signs of other specific prohibitions, including:
- Noncompliance with authorized signatories delegations and limits on fees.
- Maintaining off-books accounts.
- Not recording or inadequately recording transactions, especially those involving large amounts paid to third-party agents on the company's behalf.
- Recording nonexistent expenditures.
- Inaccurately identifying liabilities.
- Knowingly using false documents.
- Destroying accounting books and records.
Accountability — both intentions and actions count. While the prosecutor must prove that the accused intentionally committed the acts constituting the offense, willful blindness also satisfies the intention element. This means companies, including their senior officers, that deal with agents cannot overlook suspicions that the agent might be paying bribes, and they need to perform due diligence on agents. Using the CFPOA as an example, a company would be guilty of an offense under the act if one of its senior officers, acting within the scope of his or her authority, commits the offense or, knowing that a representative of the company is about to commit the offense, fails to take all reasonable measures to stop the representative from doing so. The law defines
senior officer as anyone who plays an important role in establishing the company's policies or who manages an important aspect of its activities. Performance/accountability contracts within companies need to be crystal clear on these elements.
Only in Canada, you say? Increasingly, bribery and corruption charges are being pursued outside the country that enacts legislation, and an anti-bribery compliance regime must address each location where a company operates. In Canada, the CFPOA was strengthened to include a provision for "nationality jurisdiction," which allows the law to apply to bribery offenses by Canadian companies and individuals in any part of the world in which the bribe is paid. This provision effectively creates a "you bring it along in your baggage" scenario for employees working abroad.
The crimes allegedly committed by SNC-Lavalin occurred before these provisions were enacted. As such, readers might think prosecutors face the potentially significant hurdle of proving the company committed the offenses in Canada — but guess again. In the only case to date dealing with whether bribing a foreign public official outside of Canada is an offense in Canada, the court convicted an Ottawa businessman of agreeing to bribe officials in India. The judge in that case took a broad view of jurisdiction, ruling that there was a real and substantial connection between the offense, its related transactions, and Canada, even though none of the elements of the offense had been committed in that country.