Deferred or non-prosecution agreements are not a feature of the Canadian enforcement landscape, but are used effectively in a number of other jurisdictions including the United States. The U.S. Department of Justice recently announced a non-prosecution agreement with Las Vegas Sands Corporation resolving an investigation into alleged U.S. Foreign Corrupt Practices Act (FCPA) offences in China and Macau. Under the agreement, the casino and resort company agreed to pay a criminal penalty of nearly $7-million penalty, and admitted that certain of its executives “knowingly and willfully failed to implement a system of internal accounting controls to adequately ensure the legitimacy” of significant payments to a business consultant based in China. The non-prosecution agreement between Las Vegas Sands and the DOJ reflects a compliance-oriented approach, and demonstrates how the use of such a tool could help Canadian law enforcement in moving from investigations to successful resolution.
Background: The FCPA offences and enforcement
Las Vegas Sands has significant casino and resort operations in the People’s Republic of China, which it operates through Macao and PRC-based subsidiaries. Over a period of several years, it transferred a total of about $60 million to a consultant based in the PRC for the purpose of promoting its business and brands overseas. However, in an agreed statement of facts, Las Vegas Sands admitted that it paid about $5.8 million to the consultant, who was a former PRC government official and who advertised his political connections with the PRC government, without a “discernible business purpose”.
In making these payments, Las Vegas Sands admitted that it ignored warnings from its finance staff and an outside auditor about the payments, and fired the employee who raised concerns about the payments. Certain company executives also failed to implement a system of internal accounting controls to adequately ensure the legitimacy of payments, and to prevent the false recording of those payments in its books and records.
This conduct led to both civil and criminal enforcement under the FCPA. In April 2016, Sands settled civil FCPA charges by agreeing to pay a $9 million penalty to the Securities and Exchange Commission (see announcement here).
The Non-Prosecution Agreement: A Compliance-Oriented Resolution
Non-prosecution agreements have become an important tool for U.S. law enforcement in cases involving criminal misconduct by corporations. These agreements allow for criminal settlements that subject the company to sanctions without the need for a formal conviction or guilty plea. In addition to imposing a fine, non-prosecution agreements provide law enforcement with the additional flexibility to impose mandates on companies to reform their behaviour and improve their internal governance systems, and to obtain important cooperation from companies to assist future prosecutions. Generally speaking, these types of compliance-based results are not available in conventional criminal prosecutions.
On January 17, the DOJ and Las Vegas Sands entered into the non-prosecution agreement to resolve the criminal investigation. The company agreed to pay a $6.96 million penalty. It also agreed to continue cooperating with the DOJ in any investigation and prosecution relating to the conduct at issue, to enhance its compliance program, and to report to the DOJ on the implementation of its enhanced compliance program.
The DOJ noted that Las Vegas Sands had “fully cooperated in the investigation and fully remediated.” In particular, the DOJ highlighted that the gaming and resort company did the following:
- conducted a thorough internal investigation and voluntarily collected, analyzed, and organized evidence and information for the government in response to requests.
- undertook extensive remedial measures, including updating its code of business conduct and anti-corruption policy.
- started more compliance training and upgraded how it screens third parties and new hires.
- made significant personnel changes, including hiring new leaders for its legal, compliance, internal audit and financial gatekeeper functions.
- no longer employed or was affiliated with the people implicated in the FCPA offenses.
Absence of Non-Prosecution Agreements in Canada
As we have previously discussed, Canadian law enforcement has not adopted the practice of entering into non-prosecution agreements as a means of resolving bribery offences under the Corruption of Foreign Public Officials Act (CFPOA), the Canadian statute that mirrors the U.S. FCPA. The non-prosecution agreement between Las Vegas Sands and the DOJ demonstrates the benefits that Canada may be giving up as a result: without expending the time and resources needed for a full prosecution, the DOJ was able to impose a criminal penalty, require the company to undertake significant remediation, and obtain the company’s cooperation in its ongoing investigations and future prosecutions.
Without the possibility of a non-prosecution or similar arrangement, Canadian companies may be reluctant to self-disclose foreign bribery issues. And if Canadian authorities want to impose criminal penalties for violations of the CFPOA, then they must proceed with an adversarial prosecution and obtain a conviction or guilty plea.
The United States has long been a pioneer of novel law enforcement tools and techniques in the corporate criminal context designed to boost efficiency and flexibility, and Canada has often followed suit. The SEC’s whistleblower and no-contest settlement programs are two examples of regimes that Canadian law enforcement agencies have recently adopted. Given the benefits and apparent success of the non-prosecution agreement system in the U.S., it may not be long before we see a similar approach to corporate criminal law enforcement implemented north of the border.