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Recent guilty plea demonstrates that criminal liability for corruption may extend to corporate officers

criminal liability

On February 1, 2019, former SNC-Lavalin CEO Pierre Duhaime pleaded guilty to breach of trust for his role in connection with the bribery scheme through which SNC-Lavalin secured a $1.3 billion contract to build the McGill University Health Centre (MUHC). Duhaime was sentenced to 20 months house arrest, 240 hours community service, and will be required to make a $200,000 charitable donation to victims of crime.

Breach of trust by a public officer under section 122 of the Criminal Code prohibits any public official, being a trustee of any thing for a public purpose, from converting that thing to a use that is not authorized by the trust. In addition to public officials, private actors may also be a party to the offence where a conspiracy exists with a public officer to commit breach of trust.

According to the agreed-upon statement of facts, in 2009, during the MUHC procurement process, Duhaime was informed that one of his employees was in contact with Yanaï Elbaz, then a senior manager of the MUHC. Elbaz has admitted that he supplied SNC-Lavalin with inside information that allowed it to adjust its building proposals to secure the contract, and has since pleaded guilty to charges including fraud and breach of trust. Although Duhaime neither knew about nor authorized the bribes, the agreed statement of facts indicates that once informed he did not investigate the nature of or reasons for the contact between SNC-Lavalin and Elbaz. By failing to act on the information provided to him, Duhaime became complicit in assisting with the bribery scheme.

Corporate criminal responsibility and liability of senior officers

Duhaime’s conviction serves as a reminder that individual criminal responsibility for corrupt behaviour can extend beyond the principal who paid the bribe, and may ensnare senior officials, or even board members, of the company in certain circumstances. Although the evidence was that Duhaime did not have any direct contact with Elbaz and was not personally involved in the payment of a bribe, he acknowledged criminal responsibility as a result of his admitted willful blindness toward the corrupt behaviour once it came to his attention.

Conversely, companies may be held liable in appropriate circumstances for anti-corruption violations by employees, even where those employees did not act at the direction of senior management. Corporate criminal liability in Canada was expanded in 2013 following the R. v. Pétroles Global decision, which established that the “directing minds” of the corporation may be seated in the persons of middle management for purposes of establishing criminal liability of the company. More specifically, following Pétroles Global, an employee need not be senior management or a member of the board of directors to constitute a “senior officer” under Section 2 of the Criminal Code and therefore engage the corporate criminal liability provisions provided therein. The court held that the title of an employee is not decisive, and courts may consider the full scope of what constitutes a ‘management position’. As such, individuals who are responsible for managing an important aspect of an organization’s activities – including middle managers – may engage the criminal liability of a corporation, even if such individuals have no influence over the corporation’s ultimate decision-making process.

Compliance programs and tone at the top

The circumstances of this matter are a further reminder that a strong anti-corruption program requires a clear “tone from the top”. Boards and management must promote a culture of compliance throughout the company. We have previously written on the necessity of strong corporate governance in compliance matters. It is not sufficient for the company simply to establish anti-compliance policies and procedures. Rather, companies must make anti-corruption compliance a priority throughout the organization, beginning at the Board and senior management level. Where allegations of wrongdoing arise, companies should ensure that they take the revelations seriously, have a process to appropriately consider a proper response and often rigorously investigate with appropriate assistance from counsel and other third party experts.

By Lawrence E. Ritchie, Geoffrey Grove and Jake Schmidt, Osler

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In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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