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A significant global movement is underway to combat the payment of bribes to foreign officials in international business transactions. With the trend toward tougher enforcement and the extra-territorial nature of some anti-corruption legislation, it is probably only a matter of time before a Canadian company finds itself the focus of a major investigation under Canadian or U.S. law.

Anti-Bribery Convention

In February 1999, the Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention came into force. Parties to the convention are obliged to adopt legislation making it a crime to bribe foreign public officials, whether directly or through intermediaries, and establishing corporate liability for foreign bribery.

Signatories to the convention include all 30 OECD countries (including Canada and the U.S.) as well as seven non-OECD countries (Argentina, Brazil, Bulgaria, Chile, Estonia, Slovenia and South Africa).

Canadian and U.S. legislation

Canada’s implementing legislation, the Corruption of Foreign Public Officials Act (CFPOA), makes it a criminal offence for Canadian corporations and their foreign subsidiaries to bribe a foreign public official, either directly or indirectly.

Canadian entities acting within the U.S. and Canadian subsidiaries of U.S. companies are also subject to the U.S. law prohibiting bribery, the Foreign Corrupt Practices Act (FCPA). Given the extra-territorial nature of FCPA (and related enforcement), those Canadian companies with a connection to the U.S. must also be FCPA compliant.

In addition to anti-bribery provisions, the FCPA also requires issuers with securities listed on U.S. exchanges (both U.S. and non-U.S.) to keep accurate books and records and to establish and maintain adequate systems of internal control. Often, the “books and records” provisions are relied on in prosecutions, rather than the explicit anti-bribery provisions.

Enforcement trends

In the last few years, there has been an exponential increase in the number of FCPA and international investigations, as well as record-setting settlements. This environment creates significant risk for corporations who are subject to the FCPA and their equivalent domestic legislation.

Recent developments

In December 2008, the U.S. Securities and Exchange Commission (SEC) announced that Siemens AG, a Germany-based manufacturer of industrial and consumer products, had agreed to an unprecedented $1.6 billion in disgorgement and anti-bribery fines ($350 million to the SEC, $450 million to the U.S. Department of Justice (DOJ) and an additional $854 million to the Office of the Prosecutor General in Munich). Siemens also agreed to retain an independent FCPA compliance monitor for a period of four years.  The SEC had alleged that Siemens paid bribes on design and build transactions such as metro transit lines in Venezuela; refineries in Mexico; and medical devices in Vietnam, China and Russia to name a few.

In January, it was reported the RCMP was investigating allegations that Calgary-based energy company Niko Resources Ltd., or its subsidiary, made improper payments to public officials in Bangladesh. The RCMP now has a dedicated unit dealing with corruption-related matters.

In February, the largest combined DOJ/SEC settlement was paid by the former Halliburton subsidiary, Kellogg Brown & Root (KBR), for FCPA violations and payment of bribes to Nigerian government officials.

KBR agreed to pay a combined total of $579 million in disgorgement to the DOJ/SEC and to retain an independent FCPA compliance monitor for three years.

Roddy Allan is a managing director in Navigant Consulting’s Toronto office with extensive experience leading matters involving forensic and investigative accounting, fraud, bribery, corruption and money laundering. Jane Howard is a managing consultant in Navigant Consulting’s Toronto office specializing in forensic accounting and investigations.