Two cases in the news this week serve as a reminder that bribery of government officials in a foreign country, whether or not it is tolerated in that country, is a serious offence that can be prosecuted in Canada and the United States.
Companies should also be aware that, in addition to the obvious criminal law ramifications of engaging in bribery, there may also be securities laws implications to such schemes.
Niko Resources, a Calgary-based oil and gas producer, pleaded guilty last week in Calgary to one count of bribing a foreign official, contrary to Section 3(1) of the Corruption of Foreign Public Officials Act. This was the second conviction under this Act since it was enacted in 1998, and the first since the RCMP formed a dedicated international anti-corruption unit in 2007 (in the only previous case, in 2005, a Red Deer company was fined $25,000 for bribing a U.S. customs official at Calgary Airport).
Niko admitted to providing Bangladesh's junior energy minister with an SUV, as well as trips to Calgary and New York. No cash changed hands. At the time of the bribes, the minister was investigating the amount of compensation which Niko would be required to pay to Bangladeshi villagers impacted by an explosion at a Niko facility. Following the guilty plea, the Court fined Niko $9.5 million.
There are a few things to note about the provisions of the Act under which Niko was convicted:
- while the provisions are worded differently than the corresponding anti-bribery provisions of the Criminal Code (ss. 119-121), the Act does not seem to criminalize conduct that would be legal if it took place within Canada
- there is nothing in the Act that requires any portion of the impugned conduct to take place in Canada
- the foreign public official can be an official of any level of government - federal, state, provincial, municipal - or an international organization such as the U.N.
- the Act does not apply to payments to non-governmental actors (for example, non-governmental organizations)
- there are a number of saving provisions in the Act - including that the conduct was legal or required under local law, that it relates to the reimbursement of certain expenses by the governemental official, or that it relates to the provision of services by that official
while no individual officer of Niko was charged, there is nothing in the Act which prevents it - indeed, one ongoing prosecution under the Act is against a former executive of an Ottawa company for allegedly bribing Indian government officials
The Tyson Foods case in the United States was resolved earlier this year. Tyson, a meat producer, admitted that it had been paying the wives of two Mexican governement veterinarians (who had responsibility for certifying Tyson's products for export from Mexico) in order to "keep the veterinarians from making trouble".
As word of the scheme spread through its organization, Tyson eventually reported itself to U.S. officials under a program designed to encourage reporting of white-collar crime. Charged under the United States Foreign Corrupt Practices Act, it entered into an agreement to avoid prosecution by paying a $4m penalty.
Books and Records and Internal Controls
There is one interesting aspect to the Tyson case that was not considered in Niko - in addition to the bribery charges under the Foreign Corrupt Practices Act, Tyson was also charged by the Securities and Exchange Commission with failing to keep proper books and records (having recorded the bribes as legitimate expenses), and with failing to maintain proper internal controls which would have prevented the bribery scheme, contrary to Section 13(b)(2)(a) and (b) of the Securities and Exchange Act, 1934.
There is no indication as to whether securities regulators in Canada have considered Niko's conduct in terms of Canadian requirements to maintain books and records (for example, section 60.1 of the Alberta Securities Act), or to maintain internal controls.