Bruce McMeekin Law

SNC Lavalin: Too Big Not to Prosecute

I really had to give my head a shake after reading the October 7 Globe & Mail article: “SNC-Lavalin chief warns criminal charges could force closing or sale

In an editorial board interview, SNC CEO Robert Card was quoted as saying that any move by Canadian law enforcement agencies to lay criminal charges against the company for alleged bribes paid to government officials in Libya, Bangladesh and Algeria to secure projects, and for bribes allegedly paid in Canada to secure work on a new Montreal hospital, could cause the company to close or be sold to a foreign buyer, jeopardizing the jobs of 5000 SNC employees.

He was also quoted as saying that he is not panicked about the risk of criminal charges because he thinks policy makers will understand the implications to the company. What does worry him is if some lower level person (presumably a police officer?) decides to lay charges to see what happens.

The implications he describes are the difficulties criminal charges would cause the company in attempting to secure new business at home and abroad. The business damage would only inflict pain on the already “victimized” survivors (meaning the remaining innocent employees?) and the shareholders.

Later, the Canadian Press quoted a SNC Vice-President (sensing trouble perhaps?) claiming the CEO’s comments to the Globe were not an attempt to intimidate Canadian authorities (“Comments of SNC-Lavalin CEO weren’t attempt to intimidate authorities, says V-P“)

Talk about digging a hole and then jumping in it. In a corporate crisis like this, if you feel compelled to say anything more than “we are sorry and it will not happen again” at the very least ensure your comments reflect an understanding of the circumstances in which you find yourself, thereby helping, and not hurting, your position.

Originating with the 2005 UN Convention Against Corruption, Canada’s foreign anti-corruption legislation (the Corruption of Foreign Political Officials Act or CFPOA) prohibits Canadian companies like SNC from bribing foreign officials to secure work. It is intended to protect developing and underdeveloped economies from corrupt practices that undermine their development and the rule of law. Ultimately, the victims of corruption are the people who have to live and work in these economies. Their protection is the primary goal of the CFPOA and like legislation in other developed countries. Concerns about the domestic economic effects arising from Canadian businesses having to refrain from corrupt practices are, to say the least, not a priority.

Canada has a lack-luster enforcement record when it comes to corporate crime. When it comes to enforcing the CFPOA, our performance pales in comparison to the U.S. and other G7 members, having been singled out for criticism by the OECD and Transparency International.

Why the poor performance? One reason is certainly a shortage of resources for investigation and prosecution. Another could be that the police and prosecutors believe that the criminal justice system is better served by going after the individuals who lead companies into crime. That rationale, if correct, could help explain Mr. Card’s remarks. A number of ex-SNC executives are facing prosecution for crimes committed when they were with SNC (None of the allegations against them have been proven). But the third and more likely reason is that historically the police and prosecutors have been concerned about the technical challenges inherent in the prosecution of companies. To succeed in the prosecution of crimes like fraud and corruption, prosecutors must prove that one or more senior officers with the requisite guilty mind directed the commission of the crime or failed to take reasonable measures to stop it. That can be a tall order when the company is large with multiple divisions and layers of management.

Contrary to the inference in Mr. Card’s comments, in Canada politicians do not decide who is to be charged. To suggest this is the case reveals a surprisingly unrefined understanding how things work in Canada in comparison to other states that have less respect for the rule of law (some examples of which were the location of SNC’s alleged bribes). Here, the police make that decision, independent of political oversight. After a charge is laid, the Crown, also acting independent of political oversight, may withdraw a charge if there is no reasonable prospect of conviction or it is not in the public interest to continue with the prosecution. It is the independence of action at both levels that separates us from the law of the jungle. There is nothing wrong or irregular in an accused asking the Crown to exercise its discretion to reconsider proceeding with a prosecution, so long as the request is framed within these boundaries. However, the potential for the loss of corporate jobs and shareholder value is not part of the criteria usually considered in the public interest calculus. The Ontario Court of Appeal effectively supported the correctness of this approach in recently holding that a crushing fine that pushes a corporation into bankruptcy is not objectionable so long as it fits the corporation’s moral blameworthiness for the crime. That decision involved a very small company with few assets. But the principle as articulated is not restricted to small entities and should apply equally to corporations large or small, just as all individuals, regardless of station, are supposed to be equal before the law.

Perhaps at the time of the interview, Mr. Card was thinking of the warning of U.S. Attorney-General Eric Holder, who in testimony before the Senate earlier this year, suggested that some U.S. banks, if engaged in criminal activity, could be too big to prosecute. General Holder’s justification was the same as that of Mr. Card: the prosecution of a large bank could harm the U.S. economy. Wisely, he later reversed his position, stating that no bank is too big to prosecute. Why? Because he understood that the rule of law demanded it.

The unproven allegations against SNC are amongst the most serious to ever involve a publicly traded Canadian company. In light of Mr. Card’s remarks, if SNC is not charged, all of us should be asking the question: Why?