Holding corporate feet to the fire for improper business practices

  • December 20, 2017

A number of CBA Sections responded to the government’s consultation this fall on expanding Canada’s toolkit to address corporate wrongdoing – specifically, enhancements to the Integrity Regime and a possible deferred prosecution agreement regime.

The Sections welcomed the prospect of a deferred prosecution regime as a way to reduce negative consequences for the innocent and encouraging cooperation from corporations that might otherwise be barred from seeking government contracts for extended periods.

“DPAs encourage voluntary disclosure, foster a compliance culture and can provide a more effective way of holding organizations accountable without the cost, time and uncertainty associated with criminal trials. They offer more flexibility to prosecutors,” the Sections say in their list of advantages of such a regime.

There are also drawbacks: “DPAs can weaken the deterrent effect of a prosecution. There may also be a perception that DPAs allow companies to ‘buy their way out of trouble’ and are just the cost of doing business.”

On balance, however, the Sections agree that DPAs should be available for cases of economic crime – fraud, false accounting, corruption, foreign bribery and money laundering, for example – all offences which can result in debarment under the Integrity Regime. They would not be appropriate if the conduct raises national security issues, or where it resulted in death or serious injury.

The offer to enter into a DPA discussion should come at the discretion of the prosecutor, the Sections say, while also allowing a corporation to proactively submit a DPA proposal without prejudice to any future proceeding.

Factors that should be taken into a count when determining whether to enter into a DPA include whether the organization accepts responsibility and has demonstrated that it seeks to reform its practices; whether the organization has mitigated the damage caused; whether the offending conduct was sanctioned by company policies and practice; whether a criminal conviction would have a disproportionately negative impact on the innocent – employees, shareholders, etc.; and whether the organization is a repeat offender.

“DPAs … need to reflect true contrition from the organization. However, insisting on an express admission of guilt – which could be quickly used by class-action plaintiffs – would likely have a chilling effect on DPAs and undermine their very purpose. We suggest a regime similar to the UK, where no express admission of guilt is required, though agreement on fundamental facts, compensation of victims and a commitment to remediation is required.”

The consultation also sought feedback on the existing Integrity Regime, where the Sections say they would like to see more flexibility.

“An automatic five to 10 year debarment carries significant consequences and may effectively dissolve a firm that is highly dependent on government contracts,” the Sections say.

“Since the existing Integrity Regime does not consider mitigating factors or remedial measures when assessing a debarment period, the regime does not encourage companies to cooperate.”

It would be more practical to limit automatic suspension to particular charges, and allow discretion for more minor offences.

“This flexibility would be even more important if the government does not proceed with DPAs, which presumably are intended, in part, to offer an opportunity to negotiate a resolution that addresses criminal conduct but avoids application of the Integrity Regime.”

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