Ottawa to move on legislation allowing firms to settle corporate corruption

MONTREAL — The Canadian government may be handing SNC-Lavalin Group Inc. a lifeline to resolve the criminal charges it faces by vowing to change the law to allow settlements to address corporate wrongdoing. 

The introduction of deferred prosecution agreements (DPA) will offer a way for companies to address bribery and other corruption accusations without going to trial, according to the federal government.

Under a DPA, criminal prosecution is suspended if the accused admits guilt, pays a significant fine, puts safeguards in place and co-operates with authorities. Upon completion, the charges are withdrawn.

The process is meant to prevent blameless employees and others from suffering dire consequences if a convicted company is barred from securing government contracts.

Shares in SNC Lavalin, which faces fraud and corruption charges, closed three per cent higher Friday at $57.25.

The firm has argued that the agreements allow companies to settle corporate corruption cases and avoid being put at a disadvantage when competing against rival firms in G7 countries that have such dispute resolution options.

An SNC-Lavalin spokeswoman said the move is beneficial for Canadian companies doing business internationally.

“It’s about levelling the playing field, about Canada’s international competitiveness, about improving transparency and encouraging self-reporting,” said Daniela Pizzuto.

However, it’s not yet clear if the changes will benefit SNC-Lavalin, which is slated to begin a preliminary hearing in September.

Paul Lalonde, chairman of Transparency International Canada, an anti-corruption organization, said there is doubt about whether a DPA program would apply retroactively to charges that are already in process.

And he said the normal timeline for enacting legislation suggests it likely won’t be completed before the next election in 2020.

Without details, it’s impossible to render judgment on the changes, but DPAs can be a useful enforcement tool that will bring more issues to light, he said.

“They’re not meant to be just turned into a cost of doing business and an expensive get out of jail free card,” he said in an interview.

Ottawa also said it will make enhancements to the Integrity Regime, introduced by the former Conservative government.

That could remove the mandatory 10-year debarment and provide flexibility so that penalties are proportionate with the circumstances.

No details or timeline for the legislative changes were provided.

Public Services and Procurement Canada said addressing corporate wrongdoing protects the integrity of markets and promotes fair competition.

It said in a summary of last fall’s consultations that the public is supportive of “fair, proportional and transparent measures” that hold companies to account for misconduct.

Most contributors also said DPAs shouldn’t be available to individuals.

Patricia Adams, executive director of public interest research group Probe International, said she’s disappointed, but not surprised, by the government’s move.

She said DPAs are bad for corporations and bad for the criminal justice system.

“It’s basically going to let anybody in a corporation who actually does commit a crime off the hook and there’s no guarantee that it’s not going to happen again,” she said.

“And it just becomes a cost of doing business.”

SNC-Lavalin has pleaded not guilty to the one fraud and one corruption charge filed by the RCMP against it and two of its subsidiaries.

The RCMP alleges SNC-Lavalin paid nearly $47.7 million to public officials in Libya and defrauded various Libyan organizations of about $129.8 million.

The company said the actions were taken by executives who are no longer with the company and who face criminal charges.

Industry analysts said the legislation should be helpful to SNC-Lavalin.

“We see this as a (long overdue) step in the right direction toward finally putting the 2012 corruption scandal to rest and bringing new investors to the table,” said Frederic Bastien of Raymond James.

Follow @RossMarowits on Twitter.

Companies in this story: (TSX:SNC)

Ross Marowits, The Canadian Press

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