When a company talks about the cost of doing business, it isn’t usually referring to more than $20,000 worth of stripper, escort, and security services for a foreign dictator’s kid. But, according to La Presse, that was just a fraction of the $2 million that SNC-Lavalin, the Quebec-based engineering firm, spent swanning Moammar Gadhafi’s son Saadi around Canada in 2008. And it’s one of a litany of dubious ethical decisions the company is said to have made in its efforts to win major contracts. SNC-Lavalin allegedly paid tens of millions of dollars to rig bids in places as far away as Bangladesh and even at home in Quebec.
Today, the executives known to have been involved in this behaviour are no longer with the company, and some have pleaded guilty to bribery charges. A few months before he left SNC-Lavalin, CEO Neil Bruce told the Globe and Mail in March that he had installed a new management team and had raised the company’s ethical standards after taking the helm of SNC-Lavalin in 2015. As well, SNC-Lavalin’s board of directors is, save one member, entirely different than it was in 2008. These changes led the company—which faces fraud and bribery charges over payments made to Libyan officials—to lobby the federal government last year to consent to a deferred prosecution agreement, a legal arrangement, now common in the US and the UK, that allows companies accused of corporate crimes to avoid a trial. If secured, a DPA would require SNC-Lavalin to admit to wrongdoing and agree to sanctions such as fines, third-party oversight, and systemic reform. In return, the charges against it would be dropped—as long as it complied with the terms of the agreement. SNC-Lavalin needs a DPA to avoid the destructive consequences of a successful prosecution, which include triggering a federal rule barring companies from bidding on government contracts for ten years.
SNC-Lavalin would be the first Canadian company granted a DPA after amendments to the Criminal Code in 2018 finally made the legal tool available to prosecutors. But does it actually deserve one? That was, in part, the question that, last year, was placed in front of Kathleen Roussel, the director of public prosecutions, as well as the then minister of justice and attorney general, Jody Wilson-Raybould, who oversaw her work. Their answer was a clear no.
The engineering giant was hardly shy about trying to get what it wanted. It helped fund a 2016 report, published by the Institute for Research in Public Policy, that made SNC-Lavalin’s case for a DPA, then it laid down covering fire in the form of full-page apologies in four major Canadian newspapers. There was even a video with Bruce, in October, in which the CEO warned about the cost to “the innocents” (such as employees, shareholders, and pensioners) should his company be refused a DPA. These efforts felt more like a PR campaign than a show of genuine contrition and created doubts about whether the company fully appreciated what it had done wrong.
SNC-Lavalin’s association with DPAs also seems to have corrupted the legal tool itself, especially after Wilson-Raybould’s accusation that she was pressured to decide in SNC-Lavalin’s favour by members of the prime minister’s inner circle.
The scandal over alleged interference by the Prime Minister’s Office has so soured politicians and pundits on DPAs that it has been difficult to have a productive conversation about them. “The great promise of DPAs has been missing from the discussion around the SNC case,” says Jennifer Quaid, a professor of civil law at the University of Ottawa. The scandal has also cut short a more important debate about the nature of justice and how that concept should apply to corporate misconduct. If we believe that people can be rehabilitated, shouldn’t the same hold true for corporations?
In deciding whether to negotiate a DPA with a company, prosecutors look at a range of factors, including whether the disclosure of the offence was voluntary, how involved senior officers were, and whether the organization took steps to remedy the harm it caused. The DPA would then need to be approved by a judge, who assesses whether it would be in the public interest and if the terms are “fair, reasonable and proportionate.”
DPAs promise to be a tempting option for prosecutors, given the difficulties of bringing corporations to book. As Jamieson D. Virgin and Guy Pinsonnault, two lawyers with McMillan, a Toronto business-law firm, noted in a 2018 bulletin, “Investigations into corporate wrongdoings are time consuming, incredibly costly and rarely result in guilty verdicts.” In contrast, DPAs save time and money by encouraging corporations to self-report, which provides information prosecutors can use to target the individuals responsible for the illegal behaviour without punishing the entire company. DPAs also bring other benefits, such as helping victims of corporate crimes receive restitution sooner than traditional courts allow for and introducing oversight measures—including compliance programs and corporate monitors—that improve the prospect of rehabilitation.
To some degree, that’s been the experience in the United States, where the Department of Justice has used DPAs since the 1990s—racking up between twenty to forty per year since 2006—to corral high-profile companies, including Boeing, General Electric, and Johnson & Johnson. Unfortunately, the US experience with DPAs also includes a number of examples in which the agreement seems to have been used to shield corporations from the consequences of their wrongdoing and to spare them the cost of a fuller reckoning. As David Montero, the author of Kickback: Exposing the Global Corporate Bribery Network noted in a Globe and Mail op-ed earlier this year, DPAs have been deployed in the US in conspicuously generous ways. He identifies cases in which a firm has entered into a DPA, failed to live up to its provisions, and is then granted another DPA as a result. “Prosecutors faced with a recidivist firm, in other words, are stuck with the same binary choice that DPAs were meant to avoid in the first place: prosecute or not. So regulators simply extend the existing DPA or draw up a new one.”
In the United Kingdom, where DPAs have been an option since 2014, usage has been more restrained—and more heavily scrutinized. The country’s Serious Fraud Office has only entered into a handful of DPAs, but the January 2017 deal it struck with Rolls-Royce attracted backlash. After admitting to bribing foreign politicians and officials in order to win export contracts, the engineering firm—the luxury carmaker is a separate company—apologized and agreed to pay £671 million (roughly $1.1 billion) in fines. The judge who approved the deal noted that Rolls-Royce had engaged in “egregious criminality over decades.” But, in February, the SFO announced that it wasn’t going to pursue criminal charges against individual executives, a decision that didn’t sit well with the country’s leading anticorruption organization, Transparency International UK. “It is absurd that yet again a company can admit to bribery and yet neither the bribe payers nor the management team that allowed the crime to happen are held responsible,” said executive director Robert Barrington at the time.
In Canada, of course, we don’t have any results yet by which to judge the efficacy of DPAs. At the heart of the debate around their value, though, is a much older conversation about whether the justice system’s role is to punish or to rehabilitate those who break the law. “There are some in the public who believe that anybody who has behaved badly should face the consequences,” says Patricia Hughes, the founding executive director of the Law Commission of Ontario. “And I think it’s difficult to convince people who feel that way about it that there are other methods that might work.” Or, as Jennifer Quaid says, “There is always going to be a segment of the population that will not be satisfied with any form of clemency or rehabilitation language. They want it to hurt. That’s the point of it.”
But hurt whom? As the Canadian Bar Association has argued, an automatic ban on bidding on federal contracts “carries significant consequences and may effectively dissolve a firm that is highly dependent on government contracts.” Rather than dissolving those sorts of firms, and harming the employees, shareholders, and contractors who did nothing wrong, DPAs seek to repair the damage. When Siemens, the German conglomerate, was accused of paying more than $1.4 billion (US) in bribes to government officials around the world, it paid nearly the same amount in fines to German and US authorities as part of a plea deal that also included the replacement of its management team and close supervision by regulators. Today, the company is a (more) respected member of the global business community—so much so that it recently won a $989 million contract with Via Rail.
It was largely on the basis of damage repairing that Donald Johnston, the Pierre Trudeau–era justice minister and attorney general, made SNC-Lavalin’s case for a DPA in the Montreal Gazette. DPAs, he wrote, “Illustrate how corporate wrongdoing can be addressed effectively without destroying globally competitive companies, leaving jobs, skills and technologies to be profitably harvested abroad.”
While Quaid subscribes to the importance of rehabilitation and the role that DPAs can play in facilitating it, she doesn’t buy the argument that a company should qualify for a DPA simply on the basis of its size or clout. “DPAs should not be determined as a function of the amount of dollars of collateral economic damage that seems that’s about to happen. Because, on that basis, you would say, ‘Well, it’s just a matter of the jobs or the size of the player and not whether or not there’s any chance that they’ll actually change.’” As for SNC-Lavalin, Quaid isn’t entirely sold on its apparent transformation. “They talk about the rotten apples,” she says. “But if the barrel encourages rot, you’re going to get rot again—no matter how good the apples were to start off with.”
In late may, a Quebec judge ruled those apples were sufficiently bad to warrant sending SNC-Lavalin to trial. And while a DPA is still theoretically on the table, according to David Lametti, Wilson-Raybould’s replacement as justice minister and attorney general, it’s hard to imagine the Liberal government proceeding with one given the possible attendant political fallout. Any consequences would only be amplified by a recent CBC investigation, which revealed that, of the more than $117,000 in illegal campaign donations SNC-Lavalin made between 2004 and 2011, almost $110,000 went to the Liberals.
But it might be too soon to write SNC-Lavalin’s corporate obituary. That’s because quieter changes are afoot—ones that would give the government more flexibility in dealing with companies like SNC-Lavalin. The current rules automatically disqualify a company from receiving federal contracts for a decade following a criminal conviction (unless they nab a DPA, of course ). Under the rules being mooted, the official handling the file would have the ability to reduce that duration—all the way to zero. In late May, the Canadian Press reported that finalization for the new rules was being postponed indefinitely, perhaps until after October’s federal election.
That, in the end, may buy Ottawa the time to properly introduce DPAs to Canadians and to save the first remediation agreement for a company that can live up to its objectives and ideals. “If we want it to appear legitimate,” Quaid says, “we have to do a good job of defending DPAs. We have to be careful about creating an impression that this is a form of corporate welfare. And, to date, the government has done a terrible job of explaining their merits.”
