By Richard Bistrong
This interview originally appeared on the Richard Bistrong FCPA Blog and is reposted with his permission.
Today we welcome Kristine Robidoux, Partner, Gowling Lafleur Henderson LLP, for an analysis of the new Canadian Integrity Regime. As Canada has one of the most robust Debarment regimes which includes anti-bribery enforcement, I thought that a change in the Regime was worthy of additional focus.
KR: Thank you Richard. After extensive additional consultation with industry, anti-corruption groups, academics and stakeholders, the Canadian government quietly announced its highly anticipated revisions to the Integrity Regime. The Regime replaces the previous Public Works and Government Services Canada (PWGSC) Integrity Framework, first established in 2010 and modified in 2012 and 2014.
The previous Integrity Framework had a number of controversial provisions that led to widespread criticism; in particular, suggestions that the Framework was so draconian, confusing and inflexible as to “drive underground” allegations of corporate wrongdoing, contrary to PWGSC’s stated objective of deterring such wrongdoing. For example, under the earlier Framework, government suppliers faced debarment from PWGSC for fraud or corruption committed by them or their affiliates, the definition of “affiliate” being particularly broad and covering all relationships where one entity has power to control the other or a third party has power to control both. In addition, debarment was lengthy and automatic, and there was no flexibility to allow companies to argue mitigating circumstances, robust remedial measures or cooperation to shorten the debarment period. Many of these harshest aspects of the previous Framework have been appropriately addressed: while the Regime remains undeniably strict – one of the strictest in the world – the result of these modifications is to create a much more clear, flexible and proportionate Regime.
Key Elements of The New Integrity Regime include:
A potential ten year debarment continues to apply for convictions for listed offences. Importantly however, the Regime now provides for the period of contracting ineligibility to be reduced by up to five years if it can be demonstrated that the supplier has adequately addressed and remediated the causes of the misconduct and has cooperated with enforcement agencies in investigating and resolving the conduct at issue. The Regime introduces the concept of an administrative agreement to be put in place to monitor the supplier’s progress in its application for reduced debarment, and would include compliance measures and other conditions with which the supplier must comply in order to remain eligible to contract with the government. Further, suppliers will need to retain an independent third party assessor with expertise in governance and compliance to certify that the terms of the administrative agreement are being met. The independent assessor will report to the government on the supplier’s compliance with the agreement and where an unfavourable report is submitted, the supplier will see its period of ineligibility lengthened.
2. The Breadth of the Regime
The new Integrity Regime will apply across all federal departments and agencies for procurement of goods and services and real property transactions. The Regime will also apply to sub-contractors. Prime-contractors will be required to subcontract only with eligible suppliers and will face potential debarment for five years if they knowingly subcontract with an ineligible supplier.
The list of offences for which a supplier may be debarred remains broad and encompasses offences under the Corruption of Foreign Public Officials Act, the Competition Act, the Criminal Code of Canada and the Financial Administration Act, among others, relating to conduct including but not limited to:
· Bribery (CFPOA)
· Money laundering
· Falsification of books and records
· Participation in activities of criminal organizations
· Collusion, bid-rigging or any other anti-competitive activity under the Competition Act
· Prohibited insider trading
Similar to the prior Integrity Framework, there is no minimum dollar threshold for listed offences. In other words, the Regime will not differentiate between a company that paid a small bribe and entity convicted of paying bribes totaling millions of dollars.
A key improvement to the new Integrity Regime provides that the commission of a listed offence by an affiliate will no longer automatically result in a penalty on the supplier. Rather, the Regime provides that only where the supplier has “directed, influenced, authorized, assented to, acquiesced in or participated in” the violative conduct, would the actions of the affiliate give rise to the supplier’s ineligibility. If the supplier can demonstrate that it had no such involvement, it can avoid debarment.
What Does This Mean For Contractors And Suppliers to the Canadian Government?
It is clear that with the recent changes to the Integrity Regime, the Canadian government is attempting to foster an environment that will encourage cooperation, self-investigation and voluntary disclosure by using inducements to potentially shorten the debarment period. Given the government’s emphasis on proactive investigation and remediation, it is imperative that companies carefully consider the value of conducting robust internal investigations of potential misconduct at the earliest opportunity. Should such misconduct be uncovered, particularly misconduct by a foreign affiliate over which there is not the requisite degree of control, such investigation and proactive remediation and cooperation could lead to either a much reduced debarment period or avoidance of debarment at all.
The Canadian government carefully reflected on the input it received from the various stakeholders in implementing this overhauled Regime. Is the Regime perfect? Hardly. But while some on one end of the discussion may argue that the government “caved to the pressure” from industry, and still others may argue that the Regime remains draconian and impractical, it is clear that the government has attempted to strike a balance between the need to ensure integrity in procurement and the need to promote ethical conduct – versus simply piling on additional retribution – among suppliers.
Richard Bistrong is CEO of Front-Line Anti-Bribery LLC. He consults, writes and speaks about compliance issues from his experience as an international sales VP and conviction for violating the FCPA, where he pleaded guilty and served fourteen and a half months in prison. He can be reached via his website, twitter and e-mail.