The recent furor surrounding the federal government with regard to procurement rules has raised awareness of the tough penalties that can apply to companies that run afoul of anti-corruption legislation. As noted in a previous blog post (https://www.mccarthy.ca/en/insightsblogslay-land/integrity-real-estate) the federal government’s rules around the integrity of the procurement process also applies to real estate, in particular, the possibility that leases with the federal crown as tenant can be terminated for breach of anti-corruption provisions.
Yet, even before recent events that have shaken the government over the application of its procurement rules, the federal government had already prepared a draft policy that includes certain provisions that provide greater flexibility in the treatment of companies (e.g. landlords) that have been convicted of offenses such as corruption, bribery, bid-rigging and money laundering.
Whereas the existing policy sets out the circumstances and the period of ineligibility, including termination rights, for obtaining government contracts where an entity is found to have engaged in corrupt practices, the proposed policy gives Public Works and Government Services Canada and the “Registrar” the responsibility to decide if a company should be declared ineligible and then to set the period of ineligibility or suspension. Under the proposed rules the Registrar - who is identified as the Assistant Deputy Minister of Public Services and Procurement Canada - would be responsible for making determinations of suspensions, ineligibility and entering into administrative agreements.
According to the proposed guidelines, in determining the length of the period of ineligibility, “the Registrar will take into account the seriousness of the conduct engaged in, balanced against the steps taken by the supplier to ensure that similar conduct does not recur.”
To determine the seriousness of the impugned conduct, the Registrar may consider: (i) the offender’s role in the conduct; (ii) the degree of planning involves in carrying out the offence and the duration and complexity of the offence; (iii) the extent of senior management involvement; (iv) gains realized by the supplier as a result of the offence; (v) the cost to public authorities of the investigation and prosecution of the offence; (vi) known membership in or associations with organized crime and money laundering; and (vii) whether the offender is a repeat offender or was previously warned about the impugned behaviour.
As for mitigating steps the Registrar may consider: (i) voluntary disclosure of involvement in the offence; (ii) whether a thorough investigation was conducted of the circumstances leading to the debarment and cooperation with investing authorities; steps taken to address the wrongdoing, including addressing any criminal, civil or administrative sanctions and paying compensatory damages; (iii) appropriate disciplinary action against the individuals involved; (iv) whether compliance measures and internal control systems were in place at the time of the impugned conduct; (v) the adoption and implementation of a credible and effective compliance program; (vi) the implementation or agreement to implement remedial measures, including personnel changes, the adoption of new procedures and training with regard to any measures recommended by the Registrar; and (vii) whether management has recognized and understands the seriousness of the impugned conduct and is committed to prevent its recurrence.
While offending landlords may still find themselves excluded from contracting with the federal government, or their contracts (including federal crown leases) terminated, the proposed regime nonetheless provides greater flexibility in imposing penalties and does not automatically result in lease termination as a consequence. It allows for greater consideration of the severity of the conduct and the measures taken to remediate it before imposing a penalty. Companies that find themselves in violation of the regime may find it easier to mitigate the penalties imposed upon them by taking appropriate measures.