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First Conviction under the Corruption of Foreign Public Officials Act

August-29-2013

Lawyer Jason Wadden
Area Corporate Finance and Securities, Litigation, Asia Practice, White Collar Risk Management and Investigations

Summary

The first conviction under the Corruption of Foreign Public Officials Act (the “Act”) has recently been issued, raising many important considerations for Canadian companies conducting business abroad.  In R. v. Karigar, the Ontario Superior Court of Justice convicted Nazir Karigar of agreeing to offer a bribe to a foreign official contrary to section 3(1)(b) of the Act.

Background

Much of the evidence at trial consisted of testimony from a co-conspirator who was granted immunity for cooperating with the Crown.  In reaching its decision, the Court made the following findings of fact.

In 2005, Mr. Karigar approached Cryptometrics Canada, a Kanata-based tech company, and advised them that Air India was seeking a technology solution for certain air security issues, and that Cryptometrics’ facial recognition technology might be a viable solution.  Ultimately, Cryptometrics established a subsidiary in India and Mr. Karigar was hired by Cryptometrics as the executive director of the subsidiary for the purposes of securing a contract with Air India.

Eventually, Mr. Karigar suggested to Cryptometrics that it needed to pay various bribes in order to help secure the contract, which Air India had put out to tender.  Mr. Karigar believed that paying bribes, including to certain persons at Air India and the Indian Minister of Civil Aviation, was a necessary part of doing business in India.  Cryptometrics agreed with Mr. Karigar that he should offer bribes as he recommended.  Mr. Karigar then offered the bribes, and Cryptometrics advanced funds to Mr. Karigar to make the bribes.

It was unclear whether or not the bribes were in fact ever received by the intended recipients, and, in the end, Cryptometrics did not get contract.  Nonetheless, the Court convicted Mr. Karigar of an offence under the Act.

Key Points for Canadian Companies

The Court’s decision raises important points for Canadian companies to consider when conducting business abroad.

First, the Court held that section 3 of the Act includes a conspiracy offence, and that therefore the mere existence of the conspiracy to pay a bribe was sufficient to warrant a conviction.  According to the trial judge, it was not necessary for the Crown to prove that (i) a bribe was actually paid; or (ii) the foreign public official actually agreed to accept the bribe.  Rather, the Crown must only prove that the accused believed that a bribe was being paid.  Thus, unless the decision is reversed on appeal, an agreement between business associates to bribe a foreign official can itself constitute an offence under the Act.

Second, the category of individuals who may be considered a “foreign public official” is broad, and can include employees of state controlled/sponsored entities even where the entity carries out purely private-sector commercial activities.  In Karigar, the Court appeared to have little difficulty finding that the officers of Air India, a government-owned entity, constituted foreign public officials.

Lastly, there appears to be a low threshold to prove a “real and substantial link” between the offence and Canada in order for a Canadian Court to have jurisdiction under the Act.  Importantly, the Court held that the bribery conduct could not be separated from the “legitimate aspects” of the underlying transaction when considering whether or not a Canadian court has jurisdiction.  In Karigar, the Court found the following factors sufficient to give the Ontario court jurisdiction despite the fact that the bribe was not made in Canada and Cryptometrics’ senior officials who approved the bribe were in the US: Cryptometrics was a Canadian company; Mr. Karigar had been a Canadian businessman; he was employed by or acted as an agent for Cryptometrics; the conspiracy was to obtain an unfair advantage to a Canadian company (or a significant Canadian component of an international company); and much of the work under the contract would have taken place in Canada.  The Court also referred to Canada’s obligations as a signatory under the international Convention on Combating Bribery of Foreign Public Officials in International Business Transactions as a reason to make sure an overly restrictive approach to jurisdiction does not thwart effective enforcement of the Act.

Conclusion

The conviction in Karigar is a reminder to Canadian companies operating abroad that Canadian authorities have increased their enforcement of the Act, and that Canadian Courts may take a broad view of what constitutes an offence under the Act.  Karigar reinforces the need for a robust compliance program so that employees and foreign agents of companies connected to Canada are aware of, and adhere to, a policy that prohibits paying or offering bribes to foreign public officials.

For further information on the Act or on Karigar, please contact any member of our Corporate Securities or Litigation Law Groups.