On August 15, 2013, the Ontario Superior Court of Justice convicted former business executive, Nazir Karigar, of agreeing with others to offer bribes to foreign public officials, an offence under the Corruption of Foreign Public Officials Act (CFPOA).
Karigar was convicted for his leading role in a conspiracy to bribe India’s Minister of Civil Aviation and certain Air India officials to ensure that Cryptometrics Canada was successful in its bid for a contract from Air India for the supply of facial recognition software. He is awaiting sentencing and faces a maximum prison sentence of five years.
This is a noteworthy decision1 for several reasons. First, while there have been three previous prosecutions under the CFPOA, this case is the first to have gone to trial. The other cases were all disposed of by way of guilty pleas. Second, Karigar is the first individual, as opposed to corporation, to have been prosecuted under the Act. Third, in all the previous cases, financial advantages were provided to foreign public officials. In this case, though the court found that Karigar conspired to provide financial advantages to foreign officials, there was no evidence or admission that they were actually provided.
Enforcement of the CFPOA
The CFPOA came into force in 1999, however, there was only one conviction under the Act between 1999 and 2007. Enforcement became a priority in recent years, as Canada faced substantial pressure from the international community to demonstrate its commitment to enforcing its anti-corruption laws. In 2008, Canada established an international anti-corruption unit within the RCMP Commercial Crime Program. The unit is comprised of two teams, one in Ottawa and one in Calgary, and is dedicated to the investigation of anti-corruption, which includes enforcement of the CFPOA. As noted above, since the establishment of the anti-corruption unit, there have been two prosecutions under the Act, aside from Karigar. Furthermore, the RCMP has conducted many investigations into violations of the CFPOA since 2008. There are currently at least two upcoming trials under the Act and reportedly over 35 active investigations.
The charges against Karigar stem from his conduct as a paid agent for Cryptometrics Canada, an Ottawa-based security company. In June 2005, Karigar contacted Cryptometrics Canada, stating that he had good connections with Air India and was aware that the airline was planning to acquire technology to deal with airline security issues. The discussion turned to whether Cryptometrics Canada’s facial recognition technology could solve the airline’s problems. In September 2005, Karigar and Cryptometrics Canada determined that Karigar and his associate would help Cryptometrics Canada to secure the contract for the supply of facial recognition technology from Air India in return for 30% of the revenue stream that could be expected to flow from the contract. After this agreement was reached, Karigar began introducing Cryptometrics Canada executives to senior Air India officials and also provided them with information about Air India’s requirements and inside information about the bid.
In February 2006, Air India released its official Request for Proposal (RFP) for the supply of a facial recognition security system. Karigar and Cryptometrics Canada worked together on a proposal for the RFP and during a meeting between the parties, Karigar’s associate stated that Indian officials would need to be bribed to secure the contract. Karigar then gave Cryptometrics Canada a spreadsheet that listed the officials who would need to be bribed, as well as the amount of said bribes. As the proposal was being developed by Cryptometrics Canada, Karigar continued providing the company’s executives with inside information. He also advised the company to develop a second proposal, which was to be presented under the name of a different company at a much higher price, to create a false sense of competition.
In June 2006, Cryptometrics U.S.A., the parent of Cryptometrics Canada, transferred US$200,000 to Karigar, which was likely supposed to be used to bribe a senior Air India official. In March 2007, an additional US$250,000 was transferred to Karigar to obtain the Air India contract.
Ultimately, Cryptometrics Canada’s bid for the supply contract was unsuccessful. The Court found that there was no evidence of what became of the US$450,000 that was transferred to Karigar and therefore no evidence that any bribe was actually offered or paid to a foreign public official, as defined by the Act. However, the Court found that Karigar agreed with others to offer bribes to foreign public officials and therefore was guilty of an indictable offence pursuant to section 3(1)(b) of the CFPOA.
Definition of Foreign Public Officials – As Air India is a corporation owned and controlled by the Government of India, the individuals targeted by Karigar and his co-conspirators were found by the Court to be foreign public officials, as defined under the CFPOA. This decision therefore notifies Canadian companies that the scope of the term "foreign public official" is broad and comprises not only government employees and representatives, but also employees and representatives of state-owned or state-controlled companies.
Territorial Jurisdiction – Karigar was convicted under the old version of the CFPOA, which required the Crown to prove that there was a "real and substantial link" between the offence and Canada. Karigar argued that this test was not met, however, the Court found that territorial jurisdiction was clearly established in the case given that: (1) Cryptometrics Canada is a Canadian company based in Ottawa, (2) Karigar was a Canadian resident for many years, (3) at all material times, Karigar was employed by or acting as an agent of a Canadian company, (4) Karigar and his co-conspirators were seeking to obtain an unfair advantage for a Canadian company and (5) if the bid had been successful, Canadian employees would have been responsible for a large portion of the work required by the contract.
The recent amendments to the CFPOA have eradicated the need for the establishment of a "real and substantial link." Rather, the new version of the Act, which was implemented on June 19, 2013, allows prosecution of Canadian citizens, permanent residents or companies regardless of a crime’s connection to Canada.
Meaning of "Agrees" – A key issue in the case was the meaning of the word "agrees," specifically as used in section 3(1) of the Act. Karigar argued that the Act required evidence that a bribe was actually offered or paid to a foreign public official. The Court rejected this argument and found that the term "agrees" imports the concept of conspiracy into the CFPOA, and therefore the existence of a conspiracy or agreement to bribe officials is sufficient to contravene the Act.
No Bribe Needs to be Offered or Paid – Further to the above paragraph, the Court found that no evidence of a bribe being offered or paid is needed to determine that the CFPOA has been breached. Rather, a violation of section 3 of the Act can be established if the party alleged to have paid a bribe to a foreign public official with the power to offer a business advantage believes that a bribe is being paid and the actus reus of conspiracy is established.
The Karigar case puts Canadian companies and executives on notice that the new trend of stronger enforcement of anti-corruption laws in Canada is here to stay. It also highlights the risk parties face in using third party agents in international operations and business development, as well as the benefits and risks associated with co-operating with authorities.