|April 10, 2013|
Previously published on April 8, 2013
In January, in an event widely reported, Canadian authorities brought an enforcement action against Griffiths Energy International Inc. (GEI) under Canada’s Corruption of Foreign Public Officials Act (CFPOA). In only the third instance Canadian authorities have brought corporate charges under the CFPOA, GEI was fined $9 million CAD (plus the 15% victim fine surcharge) for a total amount of $10.35 million. The Canadian government has said it intends to “redouble its fight against corruption” and expects “Canadian businesses to play by the rules.” It intends to accomplish this by implementing some of the most significant changes to the CFPOA since it first came into force in 1999, including an eventual elimination of facilitation payments and the addition of a books-and-records provision to the CFPOA.
This widespread coverage of the GEI fine and the amendments to the CFPOA, certainly has compliance with the CFPOA at the forefront for those Canadian companies engaged in international business. Importantly, compliance should not end there, as many Canadian companies must also comply with the Foreign Corrupt Practices Act (FCPA), 15 U.S.C. § 78dd-1, 15 U.S.C. §§ 78m(b)(2)(A) and (B), the equivalent anti-corruption statute in the United States.
The FCPA was enacted in 1977 in the wake of public outcry to the Watergate scandal and in response to government investigations that led to a report from the U.S. Securities and Exchange Commission (SEC) detailing illegal payments by over 400 United States companies to non-United States governmental officials, politicians and political parties. The FCPA contains two separate requirements to discourage bribery. First, the statute’s “anti-bribery” provisions makes it a crime to offer or give anything of value to a foreign government official, a foreign political party, a foreign party official, or a foreign political candidate in order to obtain or retain business for or with, or to direct business to, any person. Second, the statute’s “books and records” provision requires that companies make and keep accurate books and records and devise and maintain an adequate system of internal accounting controls.
Canadian companies can be subject to the FCPA’s jurisdiction in several ways. First, Canadian companies that are issuers of securities in the United States will be subject to the FCPA. A company is an "issuer" under the FCPA if it has a class of securities listed on a national securities exchange in the United States or is required to file periodic and other reports with the SEC under Section 15(d) of the Exchange Act. Foreign companies with American Depository Receipts that are listed on the U.S. exchange are also issuers.
Second, the FCPA applies to “domestic concerns,” defined as any citizen or resident of the United States or corporation, partnership, association, joint-stock company, business trust, unincorporated organization or sole proprietorship with a principal place of business the in the United States, or which is organized under the laws of a State of the United States. Thus, a U.S. subsidiary of a Canadian company or an American employee of a Canadian company will be subject to the FCPA, as will anyone acting on their behalf.
Third, a Canadian company, whether or not an “issuer,” could be subject to the FCPA if it causes an act in furtherance of a corrupt payment to occur within the United States. This act could take place either directly by the company or indirectly, through a director, employee, agent or stockholder of the company. As an example, a Canadian company that is not an issuer and would not otherwise be subject to the FCPA could be prosecuted if it sent a wire transfer to a U.S. bank in furtherance of an illegal bribe or a director attends a meeting in the United States where the bribery scheme is hatched.
Given the use by Canadian companies of U.S. agents and partners in business and the number of Canadian companies listed on US exchanges, the potential for FCPA applicability is quite high. As a result, it is important for any Canadian company that is required to comply with the FCPA to consult with a lawyer who is familiar with the U. S. anti-corruption laws.