The end of 2019 was marked by the announcement that the case brought by the Public Prosecution Service of Canada ("PPSC") against SNC-Lavalin had come to an end with a guilty plea to fraud by an SNC subsidiary, SNC-Lavalin Construction Inc. ("SLCI") in connection with its activities in Libya. For general background of the case and its implications, please see our recent post here.
In its press-release, SNC-Lavalin called the settlement "fair" and stressed that "the company has changed a great deal" by embracing "a world-class integrity regime and culture".
Although the guilty plea by SLCI and its conviction was in respect of fraud under section 380 of the Criminal Code rather than an offence under the Corruption of Foreign Public Officials Act ("CFPOA"), a Probation Order issued by the Court as an essential aspect of the settlement imposes requirements for anti-corruption compliance measures. The Probation Order, a copy of which we have posted here, remains in force for three years from the date of its issuance (December 18, 2019) and is subject to periodic review by the PPSC and the Court.
While the settlement involved the withdrawal of charges against the parent entity, SNC-Lavalin Group Inc., the Probation Order requires the parent entity's compliance with its requirements regarding anti-corruption compliance measures. The parent entity is indirectly bound by the Probation Order because under its terms SLCI is required to enter into an agreement with the parent entity pursuant to which the parent entity "acknowledges the contents of this Probation Order and undertakes to comply with same, failure of which shall constitute a breach of this Probation Order by [SLCI]."
In many of its substantive components, the Probation Order mirrors those agreed by Niko Resources Ltd. ("Niko") in 2011 when it pled guilty to and was convicted of violating the CFPOA in connection with bribes paid to a foreign government official in Bangladesh. This is an indication that the approach followed by the Crown in Niko almost a decade ago, in consultation with the U.S. authorities, remains highly relevant today. Details on the Niko case and the terms of its probation order can be found in our post here. The Niko and SNC-Lavalin orders together provide helpful guidance for companies on the expectations of Canadian enforcement authorities regarding appropriate measures for compliance with anti-corruption laws.
Appointment of Independent Monitor
The Probation Order requires SLCI to retain an independent monitor at the company's expense that will be tasked with preparation and submission to the Court and the PPSC of an initial report as well as three subsequent reports on SNC-Lavalin's remediation efforts over a three-year period.
Notably, the Probation Order states that the monitor may be the "person [who] is or was also retained for similar ongoing exercises" for SNC-Lavalin. This is likely a reference to the fact that SNC-Lavalin is already subject to compliance monitorships pursuant to its ongoing debarment by the World Bank and the administrative agreement it entered into with Public Services and Procurement Canada on December 8, 2015, after it was first charged with the fraud and CFPOA offences regarding its Libya activities.
Key Compliance Measures
As was recognized in the Agreed Statement of Facts for SLCI's guilty plea, since early 2012 SNC-Lavalin "took measures to reduce the likelihood of it, or its affiliates including SLCI and SLII, committing a subsequent offence. Those measures include [...] the implementation of a robust Compliance and Ethics Program, the adoption of the necessary and appropriate steps to ensure that checks and balances now exist in order to prevent any similar situation or wrongful conduct from occurring again".
The Probation Order also acknowledges the existence of the SNC-Lavalin's compliance program as it requires the company to "maintain" it and take additional actions aimed at strengthening the company's internal controls, policies and procedures if and as necessary or required in accordance with the directions set out in Appendix A to the Probation Order. The monitor is responsible for making proposals on the maintenance and/or further improvement of the SNC-Lavalin's compliance program in its initial report.
Appendix A of the Probation Order outlines key internal controls and procedures for ensuring compliance with anti-corruption law, including:
- reviews of the company's existing internal controls, policies and procedures on a no less than annual basis, with updates as appropriate;
- a system of internal financial and accounting controls and procedures sufficient to keep fair and accurate books, records and accounts to ensure that bribery is not concealed;
- a rigorous anti-corruption compliance
code, standards and procedures to detect and deter violations of
anti-corruption laws covering both the company's personnel and
its business partners (agents, intermediaries, consultants, and
other representatives) involved in sales, business development,
marketing or other customer interfaces, or government relations,
- gifts, hospitality, entertainment and expenses;
- customer travel;
- political contributions;
- charitable donations and sponsorships;
- facilitation payments; and
- solicitation and extortion;
- conducting risk assessments in order
to develop anti-corruption standards and procedures based on
specific bribery risks facing the company and taking into account a
number of factors, including:
- geographical organization;
- interactions with various types and levels of government officials;
- industrial sectors of operation;
- involvement in joint venture agreements;
- importance of licenses and permits in its operations;
- degree of governmental oversight and inspection; and
- volume and importance of goods and personnel clearing through customs and immigration.
- mechanisms to ensure effective communication of the company's anti-corruption policies, standards and procedures to all directors, officers, employees, agents and business partners, including periodic training and annual certifications;
- providing guidance and advice to directors, officers, employees, agents and business partners on anti-corruption compliance, including urgent advice and advice in foreign jurisdictions;
- system of confidential reporting and protection against retaliation for reporting;
- effective oversight of agents and business partners, including proper documentation of risk-based due diligence on retention and oversight of these third parties, as well as measures to ensure they are aware of the company's commitment to anti-corruption compliance, and seeking reciprocal commitments;
- standard provisions in agreements with agents and business partners to prevent violations of the anti-corruption laws, including anti-corruption representations and undertakings, rights to conduct audits of books and records, and termination rights in the event of any breach of anti-corruption law or policy; and
- periodic review and testing of anti-corruption compliance code, systems and procedures designed to evaluate and improve their effectiveness, taking into account relevant developments.
The Probation Order aims to foster transparency by requiring SNC-Lavalin to publish on a "major wire service in Canada" as well as on www.sedar.com information on the fraud offence under which SLCI was convicted, the sentence, the terms of the Probation Order, and the fact that a monitor has been or will be appointed.
The company is also required to publish subsequent press-releases on its official website containing an executive summary of the monitor's reports through the entire probationary period.
The Probation Order, and the case as a whole, serve as an important reminder that Canadian businesses should critically assess their internal policies and procedures to ensure they provide clear guidance to their officers, employees, agents and business partners on anti-corruption best practices and that they are effectively designed to prevent and detect anti-corruption violations.
The Niko and SNC-Lavalin probation orders set out the expectations of Canadian enforcement authorities regarding key components of a robust compliance program that is able to effectively assess and reduce the risk of violations of applicable anti-corruption laws. This is especially critical for companies that are active abroad in high risk jurisdictions and/or industry sectors.
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.