Canada: Prison Sentence In Air India Bribery Scheme Sends Deterrent Message To Canadian Executives

On May 23, Nazir Karigar, an agent of Cryptometrics Canada Inc. (Cryptometrics), was sentenced to three years in federal prison under Canada's foreign bribery statute. Mr. Karigar was convicted last August of conspiring to pay approximately $450,000 to India's Minister of Civil Aviation and officials of Air India, a state-owned enterprise, in an attempt to win a multi-million dollar contract for Cryptometrics to supply security systems to Air India. Mr. Karigar was convicted largely on the evidence of another Cryptometrics executive, who was granted immunity from prosecution in exchange for his cooperation. Karigar had unsuccessfully attempted to negotiate immunity for himself, and instead became the focus of the prosecution.

Many of the facts were not disputed at trial. Karigar raised two primary defences based on the provisions of the CFPOA at the time of the offences: (i) that the prosecution had failed to prove that a bribe had actually been paid to a foreign public official and the CFPOA did not criminalize a mere conspiracy to commit the offence; and (ii) that the Canadian court lacked jurisdiction because the events lacked a real and substantial connection to Canada. The court found against the accused on both of these points. With regard to the jurisdiction issue, the CFPOA has since been amended to expressly give Canadian courts nationality jurisdiction over Canadian citizens and corporations regardless of where the offence is committed.

The sentence in R. v. Karigar was keenly anticipated, both because Mr. Karigar is the first individual to be convicted under Canada's Corruption of Foreign Public Officials Act (CFPOA) and because his was the first CFPOA case to be decided at trial rather than by a guilty plea.

It appears evident from the reasons given by Mr. Justice Hackland of the Ontario Superior Court that he was well aware his decision will offer important guidance – and the sentence will serve as a benchmark – for subsequent CFPOA prosecutions. The theme running through the decision is that bribery of foreign officials is a serious crime requiring strong deterrence. The court emphasises early on that "[t]he idea that bribery is simply a cost of doing business in many countries, and should be treated as such by Canadian firms competing for business in those countries, must be disavowed. The need for sentences reflecting principles of general deterrence is clear."

As a starting point, the decision looks to the OECD Convention on Combatting Bribery of Foreign Public Officials, which Canada implemented through the CFPOA and from which Mr. Justice Hackland derives the "over-arching principle ... that bribery of foreign public officials should be subject to similar sanctions as would be applied to the bribery of Canadian public officials occurring in Canada".

The decision therefore seeks guidance from the sentences imposed by Canadian courts in domestic bribery, corruption and fraud convictions under the Criminal Code. It also considers the penalties imposed in the three previous CFPOA convictions, Niko Resources, Griffiths Energy and Hydro Kleen, each of which involved guilty pleas by corporate defendants.

The decision concludes that, in the circumstances, Canada's treaty obligations and domestic case law require a "significant sentence of incarceration in a federal penitentiary" in order to appropriately deter and denounce Mr. Karigar's conduct.

The three-year sentence sends a clear signal to individuals who direct activities aimed at corrupting foreign public officials that they should not expect leniency from Canadian courts. The maximum sentence available to the Court was five years imprisonment, based on the provisions of the CFPOA at the time of the offence.

Counsel for the defendant had sought a much lighter sentence, based on Mr. Karigar's age (67) and poor health, his lack of prior criminal activity and the fact that the conspiracy had failed to win the contract for Mr. Karigar's company. Conversely, the court noted as aggravating factors the scale of the scheme (involving potentially millions of dollars and very senior officials), and that Mr. Karigar had personally conceived and orchestrated it. Mr. Justice Hackland notes too that the maximum penalty under the CFPOA for bribery of foreign public officials has since been increased to fourteen years imprisonment, which he attributes to "Parliament's recognition of the seriousness of this offence and of Canada's obligation to implement appropriate sanctions."

Mr. Karigar's willingness to put the Crown to the trouble of a trial may have been another factor in the severity of his punishment. The court's reasons noted the Griffiths Energy and Niko Resources cases (which imposed corporate fines of $10.35 million and $9.5 million) as demonstrating "that a substantial penalty is to be imposed by the courts even in circumstances where a guilty plea was entered and the accused has cooperated with authorities".

Corporate executives and directors should consider too that CFPOA enforcement, while on the rise generally, is focusing increasingly on individuals. For example, five individuals have been charged to date in connection with the on-going investigation of SNC-Lavalin in regard to foreign bribery, including a former senior vice president of the company. This pattern follows similar trends in other areas of corporate wrongdoing where prosecutions are increasingly targeting responsible individuals as well as the corporations involved.

The sentence in Karigar therefore underscores just how high the stakes have become not only for Canadian companies that engage in corrupt activities abroad but also for corporate executives who become involved in those activities. The fate of Mr. Karigar and the contrasting fate of his immunized co-conspirator provide several lessons for corporations and managers.

  • First, those who orchestrate corrupt schemes can expect to bear the full brunt of responsibility and penalties.
  • Second, when investigations implicate multiple individuals, investigators and prosecutors will not hesitate to leverage their cases against certain individuals to secure convictions against others.
  • Third, cooperation with investigations can result in substantial benefits for individuals (and companies) who find themselves involved in corrupt schemes up to and including immunity from prosecution.
  • Fourth, the fact that the court felt it appropriate to impose a sentence in the upper end of the statutory range for imprisonment (up to five years) while noting that Parliament subsequently increased the penalty to a maximum of 14 years, may signal that future individual sentences could be even more severe. (There is no maximum for corporate fines in CFPOA convictions and the fine level is in the discretion of the court.)

As in all matters of both domestic and international corruption, a robust anti-corruption compliance policy will provide a first line of defence for companies and their individual directors and executives from potential liability for the misconduct of employees and representatives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Milos Barutciski
Matthew S. Kronby
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