Canada: First Trial Under The Canadian Corruption Of Foreign Public Officials Act Leads To Conviction

Introduction

The Ontario Superior Court recently convicted Nazir Karigar, an agent for Cryptometrics Canada, an Ottawa-based technology company, for agreeing to bribe a foreign public official under the Corruption of Foreign Public Officials Act.

The conviction in R. v. Karigar 2013 ONSC 5199 follows the first prosecution under the CFPOA which has proceeded to trial and holds important lessons for Canadian companies in any industry doing business abroad.

Background

The bribery conspiracy related to attempts in securing a contract for the supply of biometric facial recognition technology for Air India's passenger security system.

In June 2005, Mr. Karigar approached Cryptometrics saying that Air India was planning to acquire a biometric recognition system and that he could help Cryptometrics obtain the supply contract.  Mr. Karigar and Cryptometrics reached an agreement in which Mr. Karigar and an associate would help Cryptometrics in return for 30% of the expected revenue stream. Mr. Karigar then proceeded to introduce Cryptometrics executives to Air India officials and provided Cryptometrics with insider information about the expected tender terms and competitors.

In February 2006, Air India released its request for proposal (RFP) for the supply of the biometric recognition system. In April 2006, executives from Cryptometrics and its American parent met with Mr. Karigar and his associates to openly discuss the payment of bribes, and Mr. Karigar shortly thereafter provided Cryptometrics with a spreadsheet listing Air India officials and how much each official would be bribed with money and in Cryptometrics shares.

Cryptometrics developed a response to the RFP as well as a second bid submitted under a different company name but at a much higher price, to give the appearance of competition. In June 2006, Cryptometrics' U.S. parent transferred US$200,000 to Mr. Karigar's account, which Mr. Karigar later said was to ensure that only two bids technically qualified. Under a later agreement a further US$250,000 would be transferred to ensure the Minister of Civil Aviation would "bless" Cryptometrics' bid.

Ultimately, the Air India contract was not awarded to Cryptometrics pursuant to either of its two bids, and there was no evidence of what became of the funds received by Mr. Karigar. Furthermore, there was also no evidence that the bribes were paid as planned.

Key Findings

On August 15, 2013, Hackland R.S.J. released his decision finding Mr. Karigar guilty of entering into an agreement with others to offer bribes to Air India officials and India's Minister of Civil Aviation, contrary to s. 3(1)(b) of the CFPOA. Mr. Karigar has yet to be sentenced. In addition to monetary fines, he faces potential imprisonment.

Hackland R.S.J.'s key findings were:

  • Air India officials, as employees of a corporation owned and controlled by the Government of India, fell within the definition of "foreign public officials" under the CFPOA.
  • The meaning of "agree" in the CFPOA was not limited to an agreement between two parties, one to pay a bribe and one to receive a bribe (as Mr. Karigar had argued), but included an agreement between two parties to offer a bribe to a third individual, the foreign official, who was not a party to the agreement. This recognized the existence of the crime of conspiracy in the CFPOA. Limiting the meaning of "agree" to the giver and recipient of the bribe would unduly restrict the CFPOA and defeat its objectives, the Court stated.
  • Evidence that the funds were actually used to offer or pay bribes was not necessary for a conviction of agreeing to bribe. Mr. Karigar was convicted on the basis that there was evidence of an agreement between Mr. Karigar and his associates to bribe Indian public officials, and Mr. Karigar believed such bribes would be paid.
  • Contrary to Mr. Karigar's argument that Canada lacked territorial jurisdiction to try the offence, Mr. Karigar's offence had a "real and substantial connection" to Canada. Mr. Karigar acted as an agent of a Canadian company. Mr. Karigar was resident in Canada when he approached Cryptometrics. The benefit of the bribery would have accrued to a Canadian company and a great deal of the work would have been done in Canada. Furthermore, in considering the territorial jurisdiction test, the Court noted that the prosecution did not offend international comity. In fact, Canada is obliged to enforce the CFPOA as a signatory to the Convention on Combating Bribery of Foreign Public Officials in International Business, which promotes a level playing field in international business.
  • The CFPOA has since been amended such that even if all of the activities of Canadian nationals and corporations were to occur outside Canada, an offence can still be found to have occurred under the CFPOA.1 Mr. Karigar's case was tried before the amendments came into effect, and the Court confirmed that offences committed before June 19, 2013 required a real and substantial connection to Canada.

Future Lessons

The conviction of Mr. Karigar holds a number of important lessons for Canadian companies that do business overseas:

  • There are increased risks associated with using local agents, in particular in countries where corruption is more common. Companies should be careful by conducting thorough due diligence of anyone representing their interests in these jurisdictions.
  • The Court confirmed that merely agreeing to offer a bribe constitutes an offence even where the bribe is never actually offered or paid. Therefore a scheme developed by two or more persons to bribe a foreign public official that is later not followed through can still result in the violation of the CFPOA. Anti-corruption policies which stress ethical behaviour, and procedures to prevent preparatory steps for committing bribery need to be embedded within compliance programs
  • "Foreign public officials" are not only employees of government departments, but also employees of state owned enterprises.
  • The Court explained that offences committed under the pre-amendment CFPOA still require a real and substantial connection to Canada. However, the test is never to be applied rigidly, and is not to be limited to the essential elements of the offence. As in this case, such a connection may be present where a Canadian company is seeking to obtain business which is to be performed to a significant degree within Canada.
  • Cooperation with enforcement agencies can have benefits, but also comes with risks depending on whether immunity is granted. Much of the Crown's evidence came from the testimony of Cryptometrics' vice-president for business development who was intimately involved in the conspiracy, but testified under a promise of immunity from prosecution. However, additional evidence existed in the form of emails to the US Department of Justice describing the scheme which Mr. Karigar sent anonymously but later admitted to authoring. An official at the Canadian Consulate in Mumbai also testified that Mr. Karigar told her Cryptometrics had bribed India's Minister of Civil Aviation. No immunity existed in relation to these disclosures made by Mr. Karigar.

Conclusion

The conviction in R. v. Karigar represents a milestone under the CFPOA as the first trial conducted under the Act, and the first conviction of an individual. The prior three corporate convictions under the CFPOA have been achieved by the entering of guilty pleas.2 The Court also for the first time interpreted the meaning of key provisions in the statute, including clarifying that an inchoate offence of conspiracy exists under the CFPOA and in what circumstances a real and substantial connection will be required and found. The decision highlights the real risks Canadian companies face when conducting business in jurisdictions where corruption is prevalent, and the importance of implementing robust anti-corruption compliance programs3 for detecting and preventing corruption activities at their earliest stages.

1 See Osler Corporate Review dated June 2013 " Expansive Changes to Canada's Foreign Anti-Corruption Legislation Now in Force: Existing Compliance Programs Will Require Revisions"

2 See Osler Update dated January 29, 2013 " Vigorous Canadian Anti-Corruption Enforcement Continues Unabated: Griffiths Energy Fined 10 Million Pursuant to the CFPOA"

3 See Osler Corporate Review dated June 2010 " Investing in Ethical Corporate Culture: The Imperative for Instituting an Anti-Corruption Compliance Program for Canadian Businesses Venturing Overseas

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