- Ontario Court Sends Strong Deterrent Signal in Canada's First Anti-Bribery Sentencing
- May 27, 2014 | Author: Graham Erion
- Law Firm: Davis LLP - Toronto Office
On May 23, 2014, Nazir Karigar, the first individual convicted under Canada’s Corruption of Foreign Public Officials Act (“CFPOA”), was sentenced to three years in prison for conspiring to offer bribes to Air India officials and the Indian Minister of Civil Aviation. Justice Charles Hackland of the Ontario Superior Court, who convicted Mr. Karigar last August, cited the principles of denunciation and deterrence in handing down this historic sentence. As a deterrent, Mr. Karigar’s conviction and sentencing highlights Canada’s increased enforcement of the CFPOA, which has previously only resulted in settlements and fines for companies and not any individuals. With criminal convictions and prison sentences now a realized possibility, Canadian companies must be ever more diligent to properly manage corruption risks for themselves, their employees and their directors and officers. This bulletin briefly reviews what led to Mr. Karigar’s conviction, how the court ruled and what lessons Canadian companies should take from this episode.
What Karigar Did
At the time of the events leading to his conviction, Mr. Karigar was a paid agent for Cryptometrics Canada (“Cryptometrics”), an Ottawa-based technology company specializing in facial recognition software. From this position, Mr. Karigar assumed a leading role in a conspiracy with several persons associated with Cryptometrics and persons in India to bribe officials administering the bidding process on a tender issued by Air India. As events transpired, the contract was never awarded to Cryptometrics nor was there any evidence that the bribe was ever paid. However, the court still found a significant body of evidence that Mr. Karigar agreed to offer bribes and since Air India is a corporation owned and controlled by the Government of India its officials fall within the definition of ‘Foreign Public Officials’ under the CFPOA.
Mr. Karigar also made statements to a Canadian Trade Commissioner in Mumbai acknowledging the payment of bribes and made similar admissions in a statement he gave to the RCMP. However, his defence argued that the Crown could not prove a conspiracy or agreement by which a particular foreign public official agreed to accept or receive a bribe and that Canada lacks territorial jurisdiction over offences that were alleged to occur in India.
The Court’s Ruling
On Karigar’s first defence, the Ontario court ruled that a bribe does not need to be successful in order to contravene the CFPOA. Rather, the language of the CFPOA prohibits actions by a person that “directly or indirectly gives, offers or agrees to give or offer...” a benefit to a foreign public official. The court found that an individual could agree to offer a bribe without another individual agreeing to accept it. In other words, the conspiracy to pay the bribes is agreement enough.
On the jurisdictional defence, the court found there was a real and substantial connection to Canada on the basis that Mr. Karigar acted as agent for a Canadian company at all material times, even though much of the acts that constituted the offence physically occurred in India. Had the contract been awarded there would have been direct benefit to Cryptometrics and much of the work would have subsequently be done in Canada.
It is worth noting that Canada strengthened the extra-territorial application of the CFPOA as part of Bill S-14 last summer (before Mr. Karigar’s conviction but this wasn’t applied retroactively) by introducing the concept of “nationality jurisdiction” as a basis for Canadian courts to exercise jurisdiction over all persons or companies with Canadian nationality, regardless of where the alleged offence has taken place.
What Lessons Canadian Companies Should Take from Karigar
To the extent they haven’t already done so, Canadian companies with foreign operations should start taking notice of anti-corruption risks given the breadth of the court’s ruling against Mr. Karigar, the three years in prison he will serve for violating the CFPOA and the increased resources the RCMP has recently poured into enforcing this legislation (resulting in an estimated 35 ongoing investigations). However, taking notice is just the beginning. In order avoid a Karigar-like scenario, Canadian companies are advised to heed the following deeper lessons from this conviction and sentencing:
A rigorous anti-corruption compliance program is essential if operating abroad: this is the most basic lesson but there’s nothing basic about such a compliance program. It should involve, at a minimum, detailed compliance policies, ongoing and in-depth training of employees, precise internal accounting controls and regular oversight and monitoring. If Cryptometrics had such a compliance program in place it is likely that Mr. Karigar would have been sufficiently deterred from trying to bribe the Indian officials or, at the very least, his efforts may have been detected and prevented earlier.
Due diligence on agents and third parties is the new normal: back in 2005 when Mr. Karigar first approached Cryptometrics to help them win lucrative contracts in India it is unlikely the company would have thought to do much background due diligence on him, at least around anti-corruption risks. At that time, Canadian anti-corruption enforcement was virtually non-existent and this was simply not a risk most companies concerned themselves with. Times have changed and now it would be arguably negligent to not conduct proper due diligence on any third parties or agents seeking to represent a company with foreign public officials.
Co-operate on investigations: one of the more interesting aspects of the Karigar case is the fact that Cryptometrics was not charged under the CFPOA despite the company being the ultimate beneficiary of any business advantage arising from Mr. Karigar’s attempted bribes. This may be due to Cryptometrics’ cooperation with investigators and the fact that a high-ranking officer, who was granted immunity from prosecution, gave evidence for the Crown. Vicarious liability of companies for the actions of employees or agents acting on their behalf is well established in Canadian law but Karigar indicates that prosecutors may be convinced to let the company off the hook if they can convincingly lay blame with the individual and cooperate accordingly in the prosecution. Mr. Karigar himself was also given a lighter sentence according to Justice Hackland in part for his prior admissions and cooperation with investigators. This was also true of the Griffiths Energy case where the company’s cooperation with investigators was cited as key factor in their fine and settlement (which was still $10.35 million but would have been presumably higher without cooperation.)
While Mr. Karigar’s conviction is the first of its kind in Canada, there is little reason to think that it will be the last. Anti-bribery and corruption risks are now part of the risk management landscape for Canadian companies, who would be well served to assess this risk and ensure appropriate compliance measures are in place.