Will your company be prepared in the event of a dawn raid?
It's 8:19a.m. The receptionist at your company's national headquarters is just about to power up her computer when she's interrupted by banging on the still-locked front doors of the office. Outside is a team of officers from the Criminal Matters Branch of the Competition Bureau, as well as several members of the RCMP. They've got a "search-and-seizure warrant for the premises, and they want access to all physical and electronic records -stat.
What do you do next?
The answer to that question, says lawyer Michelle Lally, is vitally important. How a company responds to surprise search and seizures -or "dawn raids," as they're better known in Europe- can have huge implications for its viability, both long- and short-term.
Search-and-seizure raids are becoming much more common in Canada, as part of the Competition Bureau's continuing mandate to aggressively investigate and prosecute cartels and price-fixing, bid-rigging and other violations of Canadian competition laws. In 2014, for example, 37 search warrants were issued to the Bureau in its investigations of antitrust activities, and the Commissioner of Competition secured several guilty pleas with fines totalling roughly $17 million. Recent investigations have focused on air cargo, bearings, government IT services, chocolate and the worldwide auto parts industry. In .2013, for example, Japanese auto parts maker Yazaki Corporation pled guilty to an offense under the Competition Act and was fined $30 million -the largest fine to date ordered by a Canadian court.
It's a level of enforcement unprecedented in Canada, says Lally, who chairs the Competition Law and Foreign Investment Group at Osler, Hoskin & Harcourt LLP.
And it's a trend, she says, that shows no sign of letting up, with potentially devastating consequences for businesses: significant fines, possible imprisonment, private actions and class-action lawsuits, reputational damage, and economic repercussions -including, under the government's Integrity Framework, debarment from doing business with the federal government for 10 years. That poses a considerable material threat to any company that relies on government contracts for a significant percentage of its annual revenue.
In this era of heightened enforcement, says Lally, "the stakes are so high, and the consequences so significant, that it really is incumbent from a business perspective to establish robust, effective, and credible risk-management and compliance programs. And as part of that type of compliance program, you need to have a process in place to follow if-unfortunately -Competition Bureau enforcers arrive at your door with a search warrant. You don't want to be caught unprepared."
In the event of a dawn raid, Lally counsels business clients to remain calm and cooperative. Record the officers' time of arrival and ask for identification. Escort them to a meeting room and assign an employee to accompany them. Contact external counsel. "Ask the officers to delay the search until external counsel arrives," says Lally. "They may or may not grant this request, but it's important to ask." Ask also for a copy of the search warrant and provide copies to external counsel and appropriate employees- and then carefully review the warrant to determine its scope: what premises, documents and objects are included? Establish a group of employees to act as a response team, and establish protocols for handling privileged documents.
Equally important, Lally notes, are the things not to do during a search and seizure. For example, don't impede the search without good reason- you risk facing charges of obstruction that can result in fines and/ or imprisonment. Don't permit officers to go beyond the scope of the warrant: "If there's a dispute as to whether an area is specified in the warrant, or whether a document is privileged, immediately escalate the matter to external counsel," she says. Don't volunteer information, discuss the search with any third party, sign documents before checking with counsel, or talk to counsel in front of the officers unless it's absolutely unavoidable.
In short, says Lally, act in a way that cooperates with the search and seizure while protecting your legal rights. Doing so, though, requires advance planning. Her team provides comprehensive, customized "search-and-seizure" toolkits for clients as well as -crucially - real-life, scenario-based training.
"A dawn raid is a fast-paced, high-stakes, high-stress situation. It's extremely disruptive. It may involve coordinated raids of a company's branches across Canada, or across multiple countries," she says. "You want a process in place so that you don't have the additional stress of trying to put together a strategy on the fly."